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Alibaba originally purchased over 18% of Youku Tudou Inc. (NYSE ADR: YOKU) in 2014 for $30.50 per share. Alibaba will now gain control of the remaining 82% of Youku Tudou for $27.60 per share.
Youku is known as the "Chinese YouTube" and boasts 580 million users, according to digital marketing company DMR.
Alibaba has recently ramped up its efforts to become a go-to source for video and other media content. It rolled out its paid video subscription service TBO in a beta launch in September.
And the move is more than just a play to dominate the video market in China...
The acquisition allows Alibaba additional channels to promote its online retail site, online storefronts, and other services. Youku Tudo houses well-known Chinese video bloggers who can promote Alibaba's goods and services to their built-in audiences.
The Youku acquisition is just a small part of Chairman Jack Ma's plan for future success. As Money Morning Executive Editor Bill Patalon puts it, "It's a 'transformational' type of company, meaning its leaders are 'planting seeds' right now that will have big future payoffs."
But today's acquisition news isn't the only reason we're bullish on the Alibaba stock price. Alibaba's recent earnings were also very encouraging.
Alibaba reported year-over-year revenue growth of 32% on Oct. 27 in its quarterly earnings report. Gross merchandise volume was up 28% from the previous year.
And that's part of the reason Patalon refers to BABA as a "legacy" stock...
Alibaba Stock Price Will Rise Under Jack Ma's Leadership
You see, Alibaba has a plan to do more than just operate as an e-commerce company...
In a recent letter to shareholders, Ma stated, "Our key priorities for the next decade will be globalization, development of the rural economy, and big data."
Over the past two years, Alibaba has purchased companies in industries ranging from retail, tech, entertainment, and professional soccer.
Patalon praised Ma for his broad vision in gaining a foothold in entertainment, cloud computing, and media. And Ma has shown his ability to anticipate demand and profit from it as far back as 2004.
In 2004, Ma saw the flaws in the Chinese banking systems. Alibaba then created the first customer-to-customer payment system known as Alipay. According to Forbes, Alipay was soon processing nearly 50% of online Chinese e-commerce transactions.
In 2013, Alibaba opened a money market product known as Yu'e Bao. The money market product won over customers by offering better returns than banks in China. One year after its launch, 100 million people had opened accounts.
Whether it's through video streaming or banking, Ma is identifying opportunities left and right for Alibaba to become a leader in growing industries.
But Patalon says that you can't approach Alibaba stock as a short-term investment.
The Alibaba stock price has been highly volatile since hitting the market. Despite the 33% gain it's seen in the last month, BABA stock is still down 18.2% year to date.
That volatility is the result of the enormous hype that surrounded the Alibaba IPO...
"I knew that, as a hot IPO, there was every chance the stock could - and probably would - sell off," Patalon said.
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BABA stock received a major upgrade from investment research firm Zacks on Nov. 2. The firm changed it's "Hold" recommendation to "Buy," with a price target of $94.
The Alibaba stock price is now 22% higher than its IPO price of $68 per share. Because it's a "transformational company," Patalon recommends holding the stock for the long term.