Bloomberg News

Alibaba’s Average Valuation Rises to $168 Billion After Earnings

April 17, 2014

Alibaba Group Holding Ltd.’s estimated valuation rose 9.8 percent ahead of a potential initial public offering after China’s biggest e-commerce company posted record sales and earnings.

The company is valued at $168 billion, based on the average estimate of 12 analysts surveyed by Bloomberg News. That compares with the $153 billion average of 10 estimates in February. Alibaba this week reported profit more than doubled to $1.35 billion in the three months ended December, as revenue surged 66 percent to $3.06 billion.

Alibaba last month began the process for a U.S. initial public offering that may be larger than the $16 billion raised by Facebook Inc. (FB:US) in 2012. Carlos Kirjner at Sanford C. Bernstein & Co. valued Alibaba at $245 billion, saying previous estimates were too conservative.

“Alibaba crushed expectations,” Kirjner, whose valuation was the highest in the Bloomberg News survey, wrote in an April 16 report. “These results vindicate our views that Alibaba is a highly valuable asset.”

While Alibaba hasn’t said how much it will seek in the IPO, a person with knowledge of the matter said the company may sell about a 12 percent stake. That would make it a $20 billion deal, based on the $168 billion valuation.

Alibaba operates platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers. The Chinese company makes most of its sales from commissions and advertising.

Google, Amazon

The company’s potential IPO may only contain e-commerce business platforms including Alibaba.com, Taobao and Tmall, Ben Schachter, an analyst at Macquarie Group Ltd., said in a Jan. 28 note, citing Macquarie’s China Internet analyst Jiong Shao. Other assets, such as the group’s microfinancing business and Alibaba Cloud, may not be part of the offering, according to Macquarie.

Alibaba may file for its IPO as soon as this month, people with knowledge of the matter said in March.

Analyst estimates for Alibaba ranged from $136 billion to $245 billion.

At the top of the range, the company would rank behind only Google Inc. (GOOG:US) among the most valuable Internet companies, eclipsing Amazon.com Inc., Facebook and Tencent Holdings Ltd. (700)

Alibaba, 24 percent owned by Yahoo (YHOO:US)! Inc., is competing with Tencent and Baidu Inc. (BIDU:US) for China’s 618 million Internet users by making deals at home and in the U.S. to extend its e-commerce reach to mobile games and messaging.

The company’s earnings for the December quarter compare with $520 million for Facebook and $348 million posted by Yahoo in the same period. Tokyo-based SoftBank Corp. (9984) owns a 37 percent stake in Alibaba.

Alibaba, like Tencent and smartphone maker Xiaomi Corp., reflects a shift in China’s economy, with technology companies gaining prominence to match state-owned enterprises in sectors like oil and coal.

Formed by Jack Ma and partners in 1999 as a marketplace for Chinese companies, Alibaba has tapped into the nation’s boom in manufacturing and trade spurred by a wave of economic liberalization. The former English teacher owns about 7.4 percent of the company and had an estimated personal net worth of $11.5 billion, according to the Bloomberg Billionaires Index.

To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net; Sarah Gill in Sydney at sgill23@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net Terje Langeland


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