Investors continue to watch with acute angst their investments in Alibaba Group Holding Ltd (NYSE:BABA) in the wake of the lock-up expiration which means millions of shares could be up for sale depending on how other investors perceive the company’s long term prospects. The stock however seems to have stabilized waiting to see how it will react in the coming weeks. During an interview on CNBC, Gabelli Funds Portfolio Manager, Larry Haverty, raised concerns about the way Alibaba CEO, Jack Ma, has been spending money even though the company has a hefty cash balance.
Alibaba Group Holding Ltd (NYSE:BABA) did not tank in the market on the expiration of the lock-up period which Forward Management CIO Jim O’Donnell attributes to better than expected earnings in the last quarter. The earnings according to the analyst could have shaken out investors who don’t believe in Alibaba Group Holding Ltd (NYSE:BABA) as a long term play.
“Often at times a lot is made out of the lock up coming off and what you find is stocks will sell off and kind off find a level six weeks before you have that lock-up expiration. The market is smart enough to kind of anticipate that and the institutional portfolio managers often at times will trim back their positions in advance to that lock up,” said Mr. O’Donnell.
The level of volatility should increase going forward especially if the stock is to drop to the $70 mark according to O’Donnell. The $70 mark according to the analyst should be a perfect position to enter a long position for the long term.
Alibaba Group Holding Ltd (NYSE:BABA) remains well valued at the current margins according to Haverty despite the recent concerns of Ma spending. The analyst believes that the market is vastly undervaluing Yahoo! Inc. (NASDAQ:YHOO) stakes in Alibaba, which could be worth $50 to $60. A slow down with regards to the Chinese New Year should, however, have an impact on the company’s first quarter earnings according to the analyst.
“I think the thing that helped it today was the Tencent earnings. If you look at Tencent particularly over a long period of time, you have to be a believer in the Chinese internet. Tencent walked away from Alibaba Group Holding Ltd (NYSE:BABA) business essentially deciding to compete in e-commerce by being a partner with JD.com, so you have the principal e-commerce guy being Alibaba. I think the stock is appropriately priced right now,” said Mr. Haverty
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