The Chinese economy might be under a bit of strain as of late, but don't tell that to Alibaba(BABA) - Get Report . The online retailer soared nearly 9% on Tuesday, close to recouping its losses since the beginning of the year. The reason for the price spike? Alibaba announced after-hours on Friday that it had bought a 5.6% stake in Groupon(GRPN) - Get Report , an online deals site based in Chicago. Are both of these stocks set to surge in 2016?
Alibaba purchased nearly 33 million Groupon shares, according to an SEC report filed on Friday. The retailer is now the fourth-largest shareholder in the company. But the Chinese commerce giant says that it's going to play a passive role in the relationship.
"We bought a very small minority stake in Groupon in order to share ideas between U.S. and China markets in a space... This is a passive holding, and if Groupon management would like to exchange experiences with us, we are prepared to share," said Robert Christie, vice president of Alibaba's international media relations.
This isn't the first such purchase Alibaba has made recently, either. Along with investing in other Chinese Internet-based companies, the retailer recently contributed to three rounds of fundraising totaling for ride-sharing app Lyft. And Alibaba also invested $280 million into TangoMe, a Silicon Valley messaging app company.
Building its presence in North America is a smart move for Alibaba, and by investing in U.S. tech-oriented companies, the Chinese company can further learn the ins-and-outs of business in the U.S.
This week, Groupon is up as well, by more than a staggering 41%, following Friday's 30% price hike. But is it going to be a hot stock in 2016?
The company released strong fourth-quarter earnings on Thursday. Revenues were $917 million for the quarter, up nearly 4% over the same quarter in 2014. And earnings beat analyst estimates of zero cents, clocking in at 4 cents per share. But Groupon also posted a net loss of $46.5 million, compared with an $8.8 million profit in the fourth quarter of 2014.
The fourth quarter was the company's first under new CEO Rich Williams, who replaced co-founder Eric Lefkofsky in November, following months of steep declines.
Caution is still recommended with Groupon. Last year the stock lost 60%. And today the company's market cap is still just $2.3 billion. Remember when Google offered to buy the company out in 2010? Its offer had been for $6 billion. In addition, the company announced last fall that it would be cutting 1,100 jobs. There are better places to invest your money.
The daily deals business just isn't thriving. Amazon's Local service collapsed in late 2015. And rival LivingSocial dismissed 20% of its employees last year.
Alibaba itself isn't such great shakes, either. Although the company is up this week and is showing positive initiative to grow its business, it's been a tough stock to follow since its 2014 IPO. Despite its attempts to forge American ties, the company is firmly rooted in the stagnating Chinese economy. The company would have to make significant sales growth outside of China in order to grow. Last year, Alibaba pulled 98% of its sales from China.
Despite today's exciting stock pops, both Groupon and Alibaba appear to be going nowhere over the coming year.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.