Farfetch Limited [NSYE:FTCH] has been on an uptrend for the better part of 2020. It is one of the tech companies that have braved the volatility occasioned by the COVID-19 lockdowns to keep gaining in value.
That momentum does not seem easing up in the last quarter of the year. Yesterday, the stock blew past the $30 resistance, setting up the stock for more gains in the short-term. The break past the $30 is a reflection of news that Alibaba has invested $300 million into the stock.
While the news has triggered a rally, it is still not confirmed. It is coming from an unnamed source, but investors are excited that the $830 billion e-commerce giant is taking note of the $10 billion Farfetch. Farfetch refused to comment on the rumor, while Alibaba too is mum on the whole thing.
If the investment is indeed really, then Alibaba will be the third tech giant to take an interest in this company. Back in 2017, its competitors JD.com put in $397 million into Farfetch, while in 2016, Tencent had invested $125 million into the company. Through its deal with JD.Com, the company was able to gain a foothold in the vast Chinese market, by helping luxury brands from the western world reach Chinese consumers.
Investors are counting on Alibaba to open up more opportunities for the company in China. That’s because, with an investment from Alibaba, the company would have a strategic partner, one that expects to be serving over a billion customers by 2024.
Therefore, if the rumor is indeed confirmed to be true, then the excitement that the stock would attract could easily see it enter a parabolic stock price increase that could easily dwarf the gains that it has made so far in 2020.
Interestingly, it is not just Chinese companies that are angling for a piece of Farfetch. French giant, Compagnie Financiere Richemont SA also wants to buy a stake. The interesting aspect of it is that the French giant is an Alibaba partner in the Chinese market and also owns one of Farfetch’s key competitor’s Yoox Net-a-Porter Group.
This places the company in a unique position to grow its market share in key markets all across the globe. A combination of all these factors make Farfetch one of the most interesting stocks to watch in the near-term.
Farfetch offers online dealer in luxury goods across the world. It is based in London, U.K.