Sometimes mentioned as being an investment bank in disguise, Yahoo! (NASDAQ: YHOO) makes a substantial amount of money from its stake in Alibaba. As such, good news from the Chinese marketplace website tends to send Yahoo! shares higher as well. Alibaba had a strong showing on this year's Single's Day, China's biggest annual online shopping day, which caused Yahoo! to rally. Competitor Dangdang (DANG) also rallied in sympathy, while Vipshop (VIPS -0.44%) dipped on the day following a downgrade.
Happy Single's Day!
Contrary to many other cultures that have a day for celebrating the joys of being in a relationship, or at least being attracted to someone, the Chinese have developed a specific day for celebrating their bachelor life. As a reaction to the cultural norms which prescribe people to be in a relationship or coupling of some sort, a few students came up with the idea of celebrating being alone. As such, the holiday has no real religious or cultural-historical background, but it does bring in a substantive amount of money for online retailers because the day has evolved into a retail holiday of sorts.
This year, retail giant Alibaba smashed its one-day sales record, bringing in 35 billion yuan, or $5.75 billion. For comparison, the company raked in some 19.1 billion yuan last year. As for the bigger picture, Yahoo! recently reported a very strong quarter for Alibaba with revenue surging around 60% to $1.73 billion. Yahoo! currently has a 24% stake in Alibaba, but is looking to pare its holdings as Alibaba is borrowing about $3 billion to buy back its stock .
Alibaba is becoming so large that it's considering an IPO of its own. After negations for a public offering broke down in Hong Kong, the firm is now looking to get listed in the U.S. Expectations are high with analysts expecting the e-commerce company to be valued at around $100 billion, which would make it the biggest IPO since Facebook. According to Alibaba's CEO, the company is on track to overtake Wal-Mart as the world's largest retail network by 2016.
Dangdang and Vipshop
Alibaba's main competitor Dangdang got a huge boost from the Single's Day cheer, the stock surging nearly 11%. Within one minute of the start of the Single's Day sale, Dangdang's Tmall.com raked in some $19 million, with turnover reaching 6 billion yuan at the one hour mark, or around $1 billion. The company started promotions early this year, around mid-October, and the move seems to have paid off. In any case, investors were more than pleased with the numbers.
Vipshop didn't fare quite as well on Monday, with the stock down around 2.1% following a downgrade from Oppenheimer. Citing a rich valuation, as the stock is up 316.5% year-to-date, analyst Andy Yeung cut his rating to hold. Oppenheimer expects the company to keep its strong growth as well as its margin expansion, but removed its $35 price target due to its valuation . On Tuesday, however, the stock soared following a healthy third-quarter earnings beat and an encouraging outlook. The firm is growing like a weed, and some analysts believe that the stock's lofty multiple is a fair price to pay for its sales performance.
The bottom line
Yahoo!'s major cash cow Alibaba continues to bring home the bacon, as the company's Single's Day sales smashed estimates and soared year-over-year. Competitor Dangdang reported some fairly strong sales numbers as well. With Alibaba contemplating an IPO of its own, analyst expectations are highly strung for its valuation, but so far, Yahoo! continues to benefit from the company's massive growth.
