This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Coming to America, Jack Ma Style

Stocks in this article: YHOO EBAY MSFT AMZN AAPL CSCO

If they knew what a perfect storm is brewing on the horizon, maybe they wouldn't bid Amazon's stock to almost $300. At $300 a share, Amazon has a forward earnings multiple of over a 100 by some estimates. The sky-high, oxygen-tank-requiring earnings multiple is based primarily on the view revenue and earnings will continue growing. That belief could shatter immediately upon the entry of an old, well-established market leading participant that is new to the North American market.

Remember, not only is Alibaba the leader in e-commerce in China, it is also the place from which many sellers on Amazon and eBay already source their products. It's a small step for existing American online retailers to move from Alibaba sourcing to listing products on "Alibaba U.S.A." This becomes even more apparent when you consider Alibaba charges customers less than Amazon or eBay.

I bet Alibaba is finalizing details (if it hasn't already) on how existing wholesale buyers become retail sellers with the push of a button. Alibaba already has everything in place mechanically to make it happen.

Alibaba has a payment processor similar to PayPal and Amazon Payments called Alipay. Alipay claims more active customers than PayPal and Amazon combined.

For Yahoo!, it's a mixed bag. Alibaba's entry into North America represents increased competition, but since Yahoo! owns about 20% of Alibaba, Yahoo! shares could double in value. Yahoo!'s market cap based on Tuesday's close is about $29 billion. If Alibaba IPOs and successfully establishes a leading presence in North America, investors may value the Chinese company at $100 billion or more.

The prognosis for Amazon upon an Alibaba entry isn't quite as ameliorative. If investors no longer believe Amazon will continue growing rapidly, the shares may trade at a fraction of the current price.

eBay trades at a forward earnings multiple of 17, Apple (AAPL) at 10 and Cisco Systems (CSCO) near 12. If you assign a forward earnings multiple of 20 to Amazon, the shares should trade near $65.

Of course, for Amazon to trade near $65 after Alibaba enters the market, you have to believe Amazon will continue trading at a higher multiple than the other companies. If Amazon is losing money and marketshare, $65 may turn into little more than wishful thinking by investors remembering days gone by.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs