I am really not updating this blog too much, but since most of the last few posts have been about IPO’s I thought I should say something about the upcoming Ali Baba IPO.
First, the same rules apply. Much like the $FB IPO, what you should do will depend on the first day:
1) If the price “pops” stay with it as long as it keeps above the opening price the first day. If it wilts, get out and wait for a return to that price.
2) If it does not pop, don’t even try it. Wait for it to recover.
What do I think will happen?
I think it will “pop”. There is hype. It is not too expensive. It has real earnings. It has a big “moat” around China. ($FB was not as clear the first day, although it has executed flawlessly)
The problem is, it could pop too much and come back down.
In the long run, $BABA is formidable, it has little competition in China and it will expand all over the world now. Fund managers that like $AMZN; should prefer $BABA with a forward P/E around 30-40, compared to $AMZN’s 200-220. Think about it, $BABA is $AMZN, $EBAY and Paypal combined into one for all of China with over one billion people.
The IPO will start trading on Friday. I expect $90 per share or north of that after being priced around $70-$75.
After that, the market rules and I will update if necessary.
P.S. I should have mentioned that the way to play the $BABA IPO has been thru the $YHOO shares since this company owns 23.5% of $BABA. However, $YHOO is selling part of its stake, so that the pop would have to be large in order for you to benefit if you buy $YHOO shares today