Right now, investing in Alibaba Group (BABA) is the “in” thing to do. Considering Alibaba had a monster first-day pop that drove its market cap all the way to $215 billion, it’s easy to see you’re not alone in dipping your toes into the water.
Some investors consider Alibaba a bargain, even at its current price of just under $90. Others worry they could be overpaying due to the hype lingering from its IPO.
So before you invest in BABA, there are some key questions that need to be addressed.
Are you Confident in its Ability to Expand?
Alibaba is a dominant force in China, but many potential investors want the company to prove its ability to expand before they get in on the action.
According to company filings, Alibaba is not having any trouble reaching Chinese buyers, with roughly 11 billion orders on its marketplaces in 2013 alone.
The question remains: Will expansion to other markets happen, or will Alibaba fizzle out as it tries to reach a new audience?
Ma was quoted as saying the following in a letter to potential investors:
“In the past decade, we measured ourselves by how much we changed China. In the future, we will be judged by how much progress we bring to the world.”
Are You Interested in Betting on China’s Growth?
If you feel that China’s growth is the real thing, and that you don’t necessarily need to worry about international expansion quite yet, there are other Chinese companies to invest in.
However, Alibaba’s current growth rate combined with the still expanding Chinese Internet and mobile markets portend a great deal of opportunity.
Sure, before you part with your cash on a bet that BABA will be a winner, you must realize the risks associated with investing in a Chinese company. (And you can do so by checking out the “Risk Factors” in the company’s SEC filings).
But if you do decide to jump in, you won’t be alone. There are Alibaba bulls aplenty.
As of this writing, Chris Bibey did not hold a position in any of the aforementioned securities.