With the largest IPO in history of the U.S. stock market, Alibaba was on every investor’s radar Friday. Those who got in early were up huge: Alibaba’s initial price that was offered to investment banks and large firms was $68 a share; shares started trading on the secondary market for $93 a share. That made those who were able to buy in at $68 quite a bit of money.
But now that the IPO rush is over, is Alibaba worth it? This next week is critical in determining the shareholder sentiment and long-term outlook of the company.
Like the Facebook IPO (minus the technical difficulties), we could see a massive sell-off of those looking to capitalize on their purchase of Alibaba last week. If you are looking to get into the Alibaba stock this week, it may be best to wait. As the IPO hype wears off it is unlikely that we will see the crazy price swings by midweek. This could offer a better understanding of how investors value the stock.
As far as day trading is concerned, those looking to make a quick buck on Alibaba most likely missed the boat.
However, that doesn’t mean Alibaba is a bad idea for a long-term investment. Alibaba’s planned expansion into the U.S. could mean that the powerhouses like Amazon and eBay are in for a rude awakening. With Amazon’s wildly overvalued stock and Alibaba’s growth potential, we could see investors switching over to the Chinese company.
Unfortunately there are some unseen factors that need to be taken into account. For one, Alibaba is a Chinese company. China is still labeled as a Communist country. This means that the Chinese government can, and most likely will, be involved in Alibaba. This could pose issues for revenue and expansion. It’s tough to tell how this Chinese company will fair in a U.S. market. Most goods labeled “made in China” are often deemed as junk which could pose as a potential problem for U.S. market expansion.
Despite these possible setbacks, I still think Alibaba is a good long-term investment if the price is right. This week will definitely be proving grounds for what Alibaba is really worth.