Alibaba Group Holding Ltd (NYSE:BABA)’s both cheap and valuable at the same time, according to an interview on CNBC. It’s currently trading at a value slightly smaller than $90 per share, almost 5% lower than its starting price at the Initial Public Offering (IPO), but it is expected to gain momentum as time passes.
Alibaba Group Holding Ltd (NYSE:BABA)’s great advantage over its peers is the fact that it doesn’t have to buy the inventory and the warehouses. Its core responsibilities are to connect supply and demand on the market. These facts combined give the company small remunerations in revenue with great margins, making it much more profitable than Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). Alibaba Group Holding Ltd (NYSE:BABA)’s power can be seen through its influence of the market in China.
“China has a very tiny consumer economy before Alibaba and it’s skipping many stages, it’s skipping the English notion of the High Street, it’s skipping the American notion of shopping malls, and right to Alibaba and online,” said Roger McNamee, Elevation Partners co-founder.
Obviously, there is skepticism regarding the possibility of implementing the same successful strategy in countries other than China. Certainly, Alibaba Group Holding Ltd (NYSE:BABA) will not have the same competitive advantage in the US, but this will mean smaller margins for growth not a form of cadence for the corporation. It still has a lot of room to grow.
“It can trade up to $110 a share before it has the same price to earnings multiple that Facebook has in 2015 numbers. It’s growing very fast, so I think the core business alone, until you get up to that $110 level you’re pretty comfortable and not worried about externalities,” stated Jon Steinberg, Daily Mail North America CEO.
Making any form of prediction in the current state of affairs is quite a risky occupation that one might engage himself in, because Alibaba Group Holding Ltd (NYSE:BABA)’s IPO dismissed most of the assumptions prior to the event. However, if there will be no major changes in the company’s strategy, it has all the premises to be a very profitable business.
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