Investors are sizing up the value of Alibaba IPO
he New York debut of Alibaba shares later this month will likely place the company among the 10 most valuable technology firms traded in the U.S.
Whether China’s No. 1 e-commerce firm lands in the top five will depend on whether IPO investors value it more like Facebook or Amazon.com.
Alibaba had an operating margin of 51% vs. 48% for Menlo Park, Calif.-based Facebook.
Since Alibaba’s annual sales are about 15% smaller than Facebook’s, its forthcoming stock offering could value it somewhere near, but not quite as big as, the social networking giant.
Yet Alibaba’s business model is very similar to Seattle-based Amazon, because it gets the overwhelming majority of its revenue from online sales.
Both Facebook and Alibaba are a small fraction of the size of Amazon, as measured by annual revenue.
If Alibaba’s sales grow at the same rate during the second half of this year as they did in the first six months, the company’s calendar 2014 sales would rise 43% to roughly $9.5 billion.
If investors bestow on Alibaba the same price-to-sales ratio they’ve now given Facebook, and its growth holds steady, the Chinese company would be worth $157 billion at its debut.
But no one will know for sure until the deal is executed sometime during the next two weeks.
Source: Usatoday
