Over the next few days I will lay out some of my thoughts on Alibaba. I have been reading through their S-1 filings since they became available and a few things stood out for me. If I had more free time, I would cover it as if I were still an analyst. I have actually built out the financial model and prepared most of an initiation report. As this site is just a hobby, and I have a newborn at home, I have not had the time to finish all that. Instead, I will post my analysis here.
But I think it is very important for everyone who cares about the Mobile Internet and the Appconomy to keep an eye on what Alibaba is doing. First, Alibaba is a big, important company, one of the five most important Internet companies in the world. And I would hear arguments for it being at the top of that list. Second, they are building Internet services without the path dependencies or conventional patterns established in the US, with their hand in many different pies. That is why it is so hard to say Company X is the Facebook of China, or Company Y is the Yahoo! of China, because Companies A through Z are trying out “All of the Above”, and no one is trying out more than Alibaba. Third, China is already a more advanced mobile society than the US or Europe in many ways. It is common to the point of ubiquity for people in China (especially the cities) to do their banking and shopping and everything else commercial on their phones today. China’s Internet companies are not only coming of age without constraint from existing Internet companies, they are also coming of age without constraint from many of the traditional forms of commerce and business which have been around for 100 years in Western economies.
As such, I think companies like Alibaba are going to show the way for Internet companies as well as mobile consumer behaviors.
Topping all of that off, Alibaba is just a fascinating company. It does so many things. For serious investors, this is a problem. No one is ever going to be able to get good quarterly checks on the company. And their M&A book is a giant Black Box that will confound forensic-accounting types forever. There is just a lot to parse here.
We are in early stages of BABA the stock, and investors are still learning what metrics matter, and more importantly, what metrics matter to all the other investors. The Street will pick a few to serve as proxies for the overall health of the company, but there is so much more going on.
To close, I think Alibaba will be ‘fun’ to cover, but while I think the stock has some good momentum, I am less certain about how good an investment will be. I think the stock will move higher over the next twelve months, but I also suspect there will be several opportunities to get better entry points. Like I said, I am not really covering the stock, but if I were, I would be initiating coverage with a Buy rating and $120 price target.
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