by Sam Ro at Business Insider
Chinese online retailing behemoth Alibaba took the stock market by storm when it went public almost exactly a year ago.
“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.
… Forty-five of the 52 brokerage analysts covering the company still have Buy recommendations on the stock, according to Bloomberg … The average price target of this crowd: $95.50, up nearly 50% from the current level. It’s time to get real. A decline of up to 50% looks far more likely. Alibaba shares trade at about 25 times the consensus earnings estimate for the year ahead, and that should be closer to eBay ’s (EBAY) multiple of 15 …
In addition to the rich valuation, Laing warns about competition and discusses the history of Chinese IPOs that went from hot to cold.
However, the bulk of Laing’s screed raises red flags about corporate governance, conflicts of interest, counterfeit goods, and various other questionable business practices.
Particularly disturbing was the suggestion that Ma and his team might actually be making up some numbers, including its very flashy revenue growth stats, which Laing notes are considerably larger than other large tech growth companies like Google, Amazon.com, and Facebook.
… Anne Stevenson-Yang, founder of Chinese research firm JCapital Research, has closely tracked the mainland e-commerce industry in general and Alibaba specifically. She finds the growth numbers puzzling. She observes that “Alibaba’s