Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Maturity of Alibaba Group Holding Ltd (BABA) Vs. The Volatility Of Facebook Inc (FB)

It has been less than a fortnight since Alibaba Group Holding Ltd (NYSE:BABA) went public but the shares have shown such stability that they can be compared to those of a much more established company with sound and reliable earnings for over a decade. This, however, meant disappointment for traders who were counting on Alibaba shares to follow the volatile path, much like those of Facebook Inc (NASDAQ:FB) did when the company went public a couple of years ago. 1

Analysts attribute the reason for Alibaba Group Holding Ltd (NYSE:BABA)’s share price stability to the controlled manner its initial public offering was conducted. This will reflect on the price of options, trading of which begins today. This also meant that there will not be much demand. Contrast this with Facebook Inc (NASDAQ:FB), which recorded 202,938 puts to sell and 162,482 calls to buy following the days when contracts became available. Alibaba has also been quite consistent in its performance throughout the decade and a half of its existence. The company is trading at 39 times the estimated value based on its 2015 estimated earnings which is significantly higher than compatriots Tencent Holdings Ltd and Baidu Inc (ADR) (NASDAQ:BIDU) which are at 27 times and 25 times respectively.

To date, 3.3% of Alibaba Group Holding Ltd (NYSE:BABA)’s shares have been short sold by bears, which roughly translates into 12.1 million shares. The cost to borrow shares has also come down significantly from 8% initially to 0.5% last Friday. Analysts predict a liquid market for Alibaba and point out that lower borrow rates work to the advantage of bearish traders as short selling makes better sense for them than options. They conclude that while the situation at Alibaba and Facebook Inc (NASDAQ:FB) might sound similar at the outset, things are not quite the same for the two major performers.

Warren Buffett and BillionairesFree Report: Warren Buffett and 12 Billionaires Are Crazy About These 7 Stocks

Let Warren Buffett, David Einhorn, George Soros, and David Tepper WORK FOR YOU. If you want to beat the low cost index funds by an average of 6 percentage points per year look no further than Warren Buffett’s stock picks. That’s the margin Buffett’s stock picks outperformed the market since 2008. In this free report, Insider Monkey’s market beating research team identified 7 stocks Warren Buffett and 12 other billionaires are crazy about. CLICK HERE NOW for all the details.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!