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What Should Investors Watch For With Alibaba?

Alibaba, the Chinese e-commerce giant, is set to IPO in August of this year. Investors may not know too much about the company besides its huge size, but Motley Fool analyst Simon Erickson can provide some insight. In today's Stock of the Day, Simon notes that Alibaba owns two sites: Taobao, which is a lot like eBay and includes plenty of smaller merchants, and Tmall, which has larger branded merchandise. According to Alibaba, Taobao did about $177 billion in transactional revenue last year, while Tmall did $70 million. For comparison's sake, Amazon made $100 billion last year altogether.

Clearly, Alibaba is going to be an epic IPO, but investors need to dig deeper. For instance, it's important to note that Tmall's transaction revenue was up over 90% year over year, indicating that China's middle class will keep demanding popular branded merchandise. Meanwhile, mobile transaction revenue made up about 11% of the company's total revenue last year, but was up to 27% this year, indicating increased mobile usage. Both trends benefit Alibaba, but of course Alibaba hasn't hit the market just yet. So how can investors take advantage of this now?

Yahoo! owns about 22% of Alibaba, and the company will cash that in when Alibaba goes public, bringing big bucks to Yahoo!'s bank account. More important, Simon thinks that e-commerce is a winner-take-all industry, and with roughly $20 billion coming to Alibaba once it IPOs, the company will be stronger than ever. While he wouldn't say that investors should jump in on day one, they should absolutely be keeping a close eye on this company.

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