Barron's Devastating Cover Story on Alibaba Predicts the Stock Will Tank 50%

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Barron's Devastating Cover Story on Alibaba Predicts the Stock Will Tank 50%, and That's Not Even the Worst of It - by Sam Ro/ Markets/ Business Insider/ businessinsider.com

"Chinese online retailing behemoth Alibaba took the stock market by storm when it went public almost exactly a year ago.

The September 19, 2014 IPO priced at $68 per share, giving the company an eye-popping valuation of $168 billion.

“Today what we got is not money," CEO Jack Ma said that day. "What we got is the trust from the people."

But in a new, devastating 3000-word cover story for Barron's, Jonathan Laing struggles to find any redeeming qualities in the company and its stock.

For starters, Laing believes the stock, which closed at $64.68 on Friday, is worth half that..."

Richard

P.S. For some reason the link did not work. If you're interested in the story, do a seach on the title and you should get a link you'll be able to read.

 

[Talent312]

IMHO, Barron's usually over-hypes something in an attempt to be sensational, and they allow their editorial stance to infect their stories. Initially, I thought it might be a useful tool but over time, I came to equate them as the National Enquirer of financial news. Now, if you want to know what I really think...

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BI Examines Alibaba Criticism. Barron's said Alibaba's Numbers Looked Unreal. We Looked Into It ... - by Bob Bryan/ Markets/ Business Insider/ businessinsider.com

Last weekend, Barron's published a brutal 3,000-word cover story on why Alibaba's business and stock looked like trouble.

In addition to saying the stock could experience "a decline of up to 50%," author Jon Laing suggested the Chinese online marketplace and its CEO, Jack Ma, were actually making up some of its flashy performance numbers.

Laing made three claims about Alibaba that stuck out:

"Dream" stock: Alibaba is overvalued at its current 25x price-to-earnings multiple. It should be valued closer to eBay's 15x forward price-to-earnings since the businesses have similar operations.

"Puzzling" user numbers: Alibaba's user numbers seem too high. The government says there were 361 million online shoppers in all of China during 2014, while Alibaba claims to have 367 million active users buying just from their site. The article questioned the accuracy of Alibaba's number.

"Hard-to-square" user spending: The amount Alibaba says users spend on its site is too high. Barron's said that US consumers spend $1,655 per shopper online, while Alibaba claims that its customers spend $1,215 a year on its site alone. Given the higher relative income of the US population, those numbers are too close. Initially, Laing wrote that Alibaba claimed its average shopper spent 26% more than the average US online shopper. That error was later corrected by Barron's.

"In the end, gaudy financial reports can only work for so long before reality intrudes," Laing wrote. "This hard lesson figures to be driven home to Ma and his trusting investors in the coming years, and it won’t be pretty."

As expected, this drew a significant reaction from media sources and eventually an open-letter rebuttal from Jim Wilkinson, Alibaba's senior vice president of corporate affairs.

Business Insider considered the claims and evidence presented by both sides. We also spoke to investors and analysts. It seems that while the statistics remain murky, the doom and gloom over Alibaba's business is unfounded..."

Andy Kiersz/Business Insider


Richard