Alibaba, Twitter, and Tesla Motors: 3 Tests for Growth Stocks

After suffering small losses yesterday, U.S. stocks are slightly lower on Wednesday morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES: ^DJI  ) down 0.3% and 0.16%, respectively, at 10:15 a.m. EDT. In company-specific news this morning, Chinese e-commerce mammoth Alibaba yesterday filed its prospectus for an initial public offering, the first step in what could well be the largest technology IPO in history. Yahoo! (NASDAQ: YHOO  ) , which is selling 40% of its Alibaba stake in the transaction, is licking its chops. Meanwhile, Twitter (NYSE: TWTR  ) offers a cautionary tale regarding how quickly enthusiasm for a hot IPO can turn to revulsion; after a near one-fifth drop in the stock price yesterday, it will be interesting to see how the shares behave today. They're down 5.4% in early trading, which suggests even the magnitude of yesterday's decline hasn't convinced investors that the stock has reached fair value yet.

Finally, Tesla Motors (NASDAQ: TSLA  ) will release its first-quarter results after today's market close; the numbers -- and the market's reaction -- represent a key test for the niche car manufacturer and for the correction that has already affected a number of high-profile growth/momentum names.

The Alibaba story
Ecommerce + China = Growth. That equation tells a simple story that a company and its investment bankers ought to be able to sell to any investor. The big numbers in Alibaba's IPO prospectus are there on page 4 for all to see, and they are staggering; consider:

  • $248 billion in "gross merchandise value" (the value of the goods sold on its Chinese retail platforms) in 2013 -- roughly half of Wal Mart's revenue in fiscal 2014.
  • 231 million annual active buyers order an average 49 times annually.

Here are two other big numbers: $96.9 billion and $121 billion. That's the valuation range the company awarded itself as recently as last month, a twofold increase from the beginning of the year! As impressive as that sounds, it's significantly less than the estimates I've seen bandied around by financial journalists and analysts, according to whom the company could go public at a valuation of $150 billion or more. (I have even seen the figure of $200 billion crop up.)

Alibaba's offering will turn into a massive payday for Yahoo!, which could pocket $10 billion or more from the sale of 208 million shares (approximately 40% of its 22.6% shareholding of Alibaba). The windfall will be an interesting test of Yahoo! CEO Marissa Mayer's stewardship, as she balances calls from shareholders for a return of capital with growth/acquisition opportunities. Reducing its Alibaba stake will help put the spotlight back on Yahoo's own fundamentals. It will also provide a sterner test for Mayer -- I believe much of the run-up in Yahoo! shares over the course of her tenure is due to the "Alibaba effect," which she can claim no part in.

Beyond Alibaba: Will this stock be your next multibagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 16, 2014, at 2:03 PM, fadingbrightness wrote:

    CEO Jack Ma of Alibaba. All a phenomenal wonder! How, when, where?TSLA is going to reinvigorate Henry Ford & car industry. Making phenomenal business decisions. We will become the world's greatest supplier of Lithium , discovered in Wyoming. TSLA is & has

    developing nationwide supply centers & will bring car price down to $30,000.Alre

    we ready for the coming miracles. Invite me on board! What is name of Robinsons honey pot? Yippee! percyveers

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2947211, ~/Articles/ArticleHandler.aspx, 9/18/2014 4:11:56 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement