Alibaba (BABA) Stock Up on $3.7 Billion Youku Tudou Acquisition

Alibaba (BABA) stock is increasing after the company agreed to acquire Youku Tudou (YOKU) for $3.7 billion.
By Amanda Gomez ,

NEW YORK (TheStreet) -- Alibaba Group Holding (BABA) - Get Report stock is rising 0.49% to $85.80 in mid-morning trading on Friday after the company agreed to acquire online video provider Youku Tudou (YOKU) for $3.7 billion, Reuters reports.

The Chinese ecommerce company will pay $27.60 per each ADS, representing 18 ordinary shares, to acquire Youku Tudou.

Youku Tudou's board approved the deal, which is pending shareholder approval.

"We are confident that we will strengthen our market position and further accelerate our growth through the integration of our advertising and consumer businesses with Alibaba's platform and Alipay services," Youku Tudou CEO Victor Koo said in a statement.

After the acquisition is completed, Koo will remain as chairman and CEO of Youku Tuduo, which will be delisted from the New York Stock Exchange.

The transaction is expected to close in the first quarter of 2016.

Separately, TheStreet Ratings team rates ALIBABA GROUP HLDG as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate ALIBABA GROUP HLDG (BABA) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BABA has underperformed the S&P 500 Index, declining 16.37% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • ALIBABA GROUP HLDG reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($16.78 versus $1.59).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 571.9% when compared to the same quarter one year prior, rising from $514.69 million to $3,458.36 million.
  • Although BABA's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average.
  • The gross profit margin for ALIBABA GROUP HLDG is currently very high, coming in at 71.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 101.46% significantly outperformed against the industry average.
  • You can view the full analysis from the report here: BABA

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

Loading ...