Shares of Chinese e-commerce site
Shares of the Hangzhou, China-based company soared more than 190% in value from its Tuesday debut to close at $5.08 per share, giving Alibaba an initial market cap of about $25.6 billion. The stock slipped later in the week, trading at about $4.25 a share at the end of last week.
Forecasts for strong revenue growth fueled investor demand for the stock, according to Jim Friedland and Kevin Kopelman, analysts at
Strong growth prospects aside, the analysts said that Alibaba shares look overpriced at current valuations, trading at an estimated 2008 price to earnings ratio of about 140. “Alibaba Group is well positioned to benefit from the growth of the nascent e-commerce and online ad market in China,” they wrote. “However, we do not believe Alibaba’s market valuation is sustainable based on the fundamentals.”
The company, based in Hangzhou, China, raised $118 million between 1999 and 2004 from
The company has said it will use the proceeds from the offering to grow the existing businesses and for strategic acquisitions.
The Wall Street Journal reported last week that the company was planning to expand to Taiwan, Hong Kong, India and Japan, citing the company’s CEO David Wei.
The spectacular debut by Alibaba is the latest of several venture-backed Chinese Internet companies that have generated rich valuations on public markets. Beijing-based Web portal Baidu.com, which raised about $27 million from U.S. venture capital firms between 2000 and 2004, has a market cap of $12 billion, two years after its IPO.
Alibaba is part of the Alibaba Group, which also includes Yahoo’s China operation and Taobao.com, China’s largest online auction site.