When Will Alibaba Group Holding Ltd (BABA) Unveil Its Potential?

CNBC got Richard Steinberg, Steinberg Global Asset Management, as a guest to comment on Alibaba Group Holding Ltd (NYSE:BABA)’s potential risk when pursued as an investment strategy. The analyst said that the shares were difficult to attain and they were not participating in the Initial Public Offering (IPO) as the stock didn’t fit their criteria.

Alibaba.com 1

There weren’t presented any particular facts that had a weight in the specialist’s decision, but it seems that it’s difficult to grasp the approximation for the company’s true worth.

“First of all is very hard for investors to get it. Second of all […] I think it’s going to be a name that we could watch and once it’s seasoned we can really evaluate how to valuate,” said Richard Steinberg.

Alibaba Group Holding Ltd (NYSE:BABA)’s current market share in China is about 80% and last year its transactions were about $248 billion. This number is estimated to be around $700 billion by 2017, placing the company way ahead of its main competitors like Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). However, despite its great advantage, Alibaba Group Holding Ltd (NYSE:BABA)’s revenues are far smaller than those of its peers. The company makes money mostly by charging merchants for advertising and transactions.

Net profits are its main strength, as the company has a profit margin in the high 70’s, way beyond any other e-commerce business could currently get. Consequently, ascribing Alibaba Group Holding Ltd (NYSE:BABA)’s shares a concrete value is a difficult task because it’s practically impossible to approximate its potential. Furthermore, it is not clear when the Chinese star will enter the global arena. Probably at that point the figures will be seen clearer and the current IPO rush will have calmed down.

As there is still time to ponder on the future course of actions, it might be wise not to succumb to the temptation of rushing into Alibaba Group Holding Ltd (NYSE:BABA) and obtain a smaller, yet more secure, return on your investment.


Disclosure: none

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.