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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., Inc. (AMZN): Yahoo! Inc. (YHOO)’s Golden Egg Is Alibaba

Just like Amazon, eBay has been trying to ramp up its presence in China. The company had a hard time mastering the over-sized Chinese market with its own Marketplace and through acquisitions. However, eBay has been less than successful in figuring out China just like numerous other leading Internet companies including Amazon and Google but the payments business with PayPal had better luck in China.

EBay’s management did disclose recently that the company has been a lot more selective in choosing the sellers in its marketplace, and implemented more stricter standards to enable buying and selling. And going forward, China will be a crucial market for both, Inc. (NASDAQ:AMZN) and eBay for future growth as addressable market in developed markets shrink in size. And since eBay’s marketplaces and payments divisions conduct a large amount of cross-border transactions, the need to win over Chinese consumers is very important for eBay’s future growth prospects. However, Alibaba’s leading Internet platform–Taobao remains very dominant in China with a lot more consumer acceptance and usage as well.

Alibaba’s earnings up more than 200%

A number of sell-side analysts upgraded Yahoo! Inc. (NASDAQ:YHOO) stock citing the increased public market value of Alibaba, which can be worth up to $120 billion. In addition, the proceeds Yahoo received from the partial sale of its Alibaba stake is being used to buyback even more stock. Yahoo recently announced that it will be repurchasing 40 million shares from activist investor, Dan Loeb at a price of $29.11 and using up $1.2 billion in cash for the transaction. And after the share repurchase Dan Loeb will step down from Yahoo’s board but will continue to own more than 20 million shares of Yahoo after the buyback.

Alibaba Group is worth a lot more than the recorded values on Yahoo’s balance sheet. As a result, Yahoo’s intrinsic value is higher than its current market cap. In 1Q13, Alibaba’s top line revenues grew 71% Y/Y to $1.38 billion, and net income increased a whopping 203% on a year-over-year basis to $669 million. So Alibaba’s valuation in an IPO is not overly optimistic and comparable to recent big name tech IPOs like Facebook’s listing. Alibaba’s IPO or the continued increase in the expected value of Alibaba remains a major catalyst for Yahoo shares going forward. At the time of an Alibaba IPO, Yahoo might possibly divest sizable large portion of its 24% stake, but at the discretion of Alibaba’s management.

The article Yahoo’s Golden Egg Is Alibaba originally appeared on and is written by Ishfaque Faruk.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends, eBay, and Yahoo. The Motley Fool owns shares of and eBay. Ishfaque is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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