Alibaba Group Holding Ltd. is a Chinese holding company that recently announced its plans to offer an IPO. This could be the world’s largest initial public offering, as analysts estimate that Alibaba could be valued at $150 billion to $250 billion.
The lower end of the range would show that the company is as valuable as Facebook while the higher end of the range has a valuation close to that of Walmart. The company is currently the world’s largest online marketplace, with 231 million active buyers annually and roughly $248 billion of merchandise moving through its sites in 2013. This means that it has more transaction volumes compared to Amazon and Ebay combined.
Alibaba IPO Outlook
With its headquarters and client base in China, investing in the company is as good as investing in the world’s second largest economy. In the country, Alibaba actually holds 80% of the e-commerce market share.
It has several subsites, including Taobao which is a free-for-all bazaar featuring hundreds of millions of goods from eight million merchants. It has Tmall for higher-end items such as Nike and Gap.
Aside from generating revenue from sales commissions, Alibaba also makes money on its advertisements. In 2013, revenue climbed 62% to $8 billion and is projected to grow at a 55% pace each year. In terms of company expenses, Alibaba is able to limit this by not keeping inventory. This means that the company is able to have a high operating margin compared to Google and Facebook.
Take note as well that the Chinese economy is expanding thrice as fast as the United States. Analysts estimate that the stock price could grow by 30-fold well into 2015 if the recovery keeps going on in China. The deal is set to be launched a few months of now but buying pressure could escalate once the Alibaba IPO is announced.
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