The initial public offering, the world's largest IPO ever, raised $21.8 billion on Thursday, following the pricing of Alibaba's American Depository Receipts on the NYSE at $68 a share. Including the overallotment, Alibaba raised $25 billion, the largest in the world ahead of Agricultural Bank of China, according to Dealogic. Prior to Alibaba's debut, the largest U.S.-listed IPO was Visa's (V) , which raised $19.7 billion when it went public in 2008.
Alibaba opened trading on Friday at $92.70, a 36% jump from its IPO price. More than 271 million shares of Alibaba's ADRs changed hands on Friday to close at $93.89, up 38% from its IPO price.
Beijing-based Alibaba had previously raised the price on its IPO following strong investor demand as China's largest Internet company continues to post impressive results.
Several analysts have initiated coverage. Here's what they had to say.
Youssef Squali, Cantor Fitzgerald (Buy; $90 PT)
Last week's market focus was on the record-breaking Alibaba IPO, which raised ~$21B and ended on its first day up a strong 35%, making it one of the most visible IPOs of all time. With this event behind us, and prospects for Alibaba's first earnings reporting season only weeks away, our attention quickly shifts to its 2Q:FY15 results and how management plans to "manage" the Street going forward. Given all the hype built around the IPO, we believe expectations are running high, creating an environment for much volatility short-term. Long-term, we believe this is one of the best plays on growth in global ecommerce.
BABA started trading last Friday, and with it came the opportunity to invest in China's largest e-commerce platform, which we believe has the potential to dominate global online commerce over time. We initiated coverage with a BUY and $90 PT, a level reached on day one of trading! We believe a differentiated pricing model, strong brand, and unmatched scale give Alibaba a sustainable unfair competitive advantage relative to peers both in and outside China. With the IPO behind us, our eyes turn to the company's first public quarterly results in a few weeks, and to how management will deal with the Street going forward. Estimates are only starting to form with on-going initiations, but given all the hype built around the IPO, we believe expectations are running high, creating an environment for much volatility short-term.
Following the record-setting IPO on Friday, we are initiating coverage of BABA with a Buy rating and a 12-month target price of $125. Our target is based on 32x our CY16 non-GAAP EPS estimates, representing a P/E/G multiple below 1x against our EPS growth forecast of 55% this year, 33% in 2015 and 42% in 2016.
We see BABA as a core holding for growth managers. After a 38% one-day gain (SPX down 0.05%) following deal pricing, we would not be surprised to see the stock consolidate somewhat lower than Friday's $93 close price. While impressive earnings growth has continued over the past several quarters, it's important to recognize this is being diluted by the shift to mobile (a transitory drag based on rapid take-rate expansion) and a cycle of accelerated spending. We expect these will normalize by the 2016 timeframe and EPS growth will re-accelerate.
Gil Luria, Wedbush Securities (Outperform) (Research note from Sept. 11; day of coverage initiation)
We believe BABA may offer one of the most compelling combinations of size, growth and profitability on a global basis. BABA has leveraged network effects and a marketplace business model in the largest e-commerce market in the world to drive gross merchandise volumes greater than (AMZN) and (EBAY) combined. We are initiating coverage with an OUTPERFORM rating and an $80 price target.
Profitability in a hyper-competitive consumer e-commerce market presents an advantage over direct competitors. We believe the lack of profitability at direct competitors such as JD, VIPS, JMEI and DANG and AMZN China indicate price competition may not be enough to make inroads in the marketplace model.
Although Alibaba shares a similar penchant to AMZN and GOOGL for sprawling expensive investments, we believe that at current rates, that penchant will leave enough earnings growth for investors.
--Written by Laurie Kulikowski in New York.