Profit from the Most Anticipated IPO in Years (Before It Hits the Market)

Michael A. Robinson

China's Alibaba is a clear leader in the world of e-commerce and is a combination of PayPal, eBay, and Google all rolled into one.

It accounts for more than 50% of online sales in China, the world's number two e-commerce market, and one that's on track to overtake the U.S. by the end of the decade.

Analysts expect the company to go public as early as the end of this quarter. And investor interest is off the charts…

That's why I want to show you how this massive interest in Alibaba can direct us to a tremendous profit opportunity before the IPO hits the market…

Analysts Are Missing the Potential

Consider that Alibaba's IPO could raise as much as $20 billion with a market valuation between $100 billion and $150 billion.

With Alibaba, investors will be getting a stock that offers a broad play on the world's most populous economy and a mushrooming web sector.

Market researchers McKinsey & Co. estimate China's e-commerce market at $210 billion for 2012, the last full year for which data was available.

But that figure greatly understates the potential there.

According to McKinsey, Chinese e-commerce grew at an annual compound rate of 120% over roughly the past decade.

So, when analysts estimate a market value of $420 billion by the end of this decade, that gives us a better insight into Alibaba's true potential worth.

The company has a vast web empire to tap China's thriving e-commerce market. It boasts several successful web portals as well, with online payment services similar to Google Checkout and PayPal.

Called Alipay, the payment unit serves as an escrow system for e-transactions. As of mid-2013, it had the largest market share in China, accounting for more than 800 million registered accounts.

And that's just one of its many portals. For instance, Alibaba also operates a site known as TaoBao, which is the firm's consumer-to-consumer portal, offering buyer and seller capabilities similar to eBay.

All of which helps explain why Alibaba has such strong reported financials. From July to September 2013, the company's sales reached $1.78 billion, with net income coming in at $801 million.

But the company is hardly resting on its laurels. It plans to expand into overseas markets and also is moving into the growth sectors for gaming and mobile apps.

Yahoo Led Us to an Even Better Play

In case you're wondering how such detailed financial data came to light regarding privately held Alibaba, it's because of Yahoo! Inc. (Nasdaq: YHOO).

Some investors may be tempted to buy Yahoo as an indirect play on Alibaba, because, yes, Yahoo owns 24% of Alibaba – a stake that Bloomberg says could have a post-IPO value of $18 billion.

And the fact remains that Yahoo is a great Internet property that's in the midst of a major turnaround.

But as much as we like Yahoo for the long haul, in no small part because of the Alibaba relationship, we think there is a better way to invest in China's e-commerce boom….

Michael A. Robinson

About the Author

Browse Michael's articles | View Michael's research services

Michael A. Robinson is a 35-year Silicon Valley veteran and one of the top technology financial analysts working today. He regularly delivers winning trade recommendations to the Members of his monthly tech investing newsletter, Nova-X Report, and small-cap tech service, Radical Technology Profits. In the past two years alone, his subscribers have seen over 100 double- and triple-digit gains from his recommendations.

As a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs and high-profile industry insiders. In fact, he was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon. And he was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.

In addition to being a regular guest and panelist on CNBC and Fox Business Network, Michael is also a Pulitzer Prize-nominated writer and reporter. His first book, "Overdrawn: The Bailout of American Savings" warned people about the coming financial collapse - years before "bailout" became a household word.

You can follow Michael's tech insight and product updates for free with his Strategic Tech Investor newsletter.

… Read full bio