The Chinese Internet company's initial public offering price is 30 times forward price to earnings, which isn't terribly expensive. By way of comparison, when Facebook (FB) debuted in 2012, it had a 58 times forward P/E.
But although the stock isn't through the roof now, investors should avoid the stock if Alibaba shares go over $110 a share, which could be the case a year from now.
I would fully expect that Alibaba will get a discount relative to an American Internet company like Facebook, due to concerns about corporate governance and transparency. I think all Chinese Internet companies get that kind of discount.
We'll see. Anything can happen on the first day of trading for an IPO.At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation."
You can view the full analysis from the report here: FB Ratings Report