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are on-going concerns by investors over the interpretation of structured investment vehicles, and there’s also on-going political tensions coming from Russia (China’s neighbor). Historically, global trade relations between the United States and China have remained stable, but the on-going political risk carries heavy repercussions for Alibaba’s whole sale business, and since it’s a legal holding company, subject to the jurisdiction of China there’s always the risk of eminent domain. The on-going capital investment phase may limit free cash flow growth as well, which isanother factor to consider.However, aside from those three factors, competitive dynamics heavily favor Alibaba in China. Furthermore, Alibaba can expand its ecommerce platforms into other markets.Alibaba IPO will be a wildcard event. On one hand Yahoo plans to liquidate 140 million shares, on top of that Alibaba will issue shares that may dilute up to 10% of Alibaba’s total share outstanding figure. The dilution impact, paired with heavy selling from an established equity holder may cause the stock to decline on the day of IPO.However, on a PEG basis the company is attractively valued, and the outward growth potential isthere, so the heavy selling may be met with significant buying.Therefore investors may want to avoid the Alibaba IPO entirely and wait a couple of months on the sidelines until earnings guidance figures come in, along with further coverage from sell-side analysts.The first thing about financial modeling is the filing in this case it was the F-1 form that Alibaba group has filled with the SEC. According to internet sources, forecasted future revenue growth
Seems favorable to Alibaba.(Here, GMV implies gross monetizing value)The conversion and the fair value of a single Alibaba group stock is around USD 45.7.
Since Alibaba Group is not the only player in the market, this is actually a blessing in disguise forevery financial modeler since we can do a competitive analysis and get to know about the beta value, the risk premium that the investors require as well as the debt structure.Alibaba IPO will be a wildcard event, as further dilution, paired with Yahoo liquidating its position may impair Alibaba valuation. Alibaba (BABA) may have significant growth potential given the favorable dynamics of an emerging Chinese middle class paired with opportunities to grow the business in international markets. The company continues to launch services that are highly compatible with the company’s core segments. However, the IPO poses significant risks, and it may not be a very good idea to chase after the stock until there’s some stabilization in theprice action.4.Financial ratio analysis:Alibaba has experienced strong financial growth over the past decade. Additionally, the company does not have any immediate risk of not meeting short or long term obligations. The company’s strengths come from large cash reserves, high profit margins, and low debt levels.