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

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Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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