Blodget: Alibaba analysts right to curb their enthusiasm

Joanna Campione
·Producer

Call it tempered bullishness.

The enforced 40-day quiet period for analysts from underwriting firms in the Alibaba (BABA) initial public offering has ended. Five of the six investment bank underwriters for Alibaba's IPO say they are bullish on the stock. JPMorgan, Deutsche Bank, Citi, Morgan Stanley and Credit Suisse all gave the Chinese ecommerce giant the equivalent of a “buy” rating.

Goldman Sachs was the only investment bank underwriter that gave Alibaba a "neutral" rating. But overall analysts at Goldman aren’t bearish, saying that Alibaba could rally 35% over the next two years.

Yahoo Finance’s Henry Blodget says “People are realizing just how big China is and what a big opportunity this is.”  But Blodget calls the analysts' ratings "tempered" and "grounded somewhat in reality."

"The explosive growth of 300% a year?  That's way behind us," he says.

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Alibaba shares climbed more than one-third on September 19, the day of its IPO. It became the fourth-most valuable technology company in terms of market capitalization. Only Apple (AAPL), Microsoft (MSFT) and Google (GOOG) are bigger. Blodget says, “It’s so big that a lot of fund managers just simply have to allocate capital to it. They are looking for a decent return,” he says. “It doesn’t have to be a home run.”

 

After falling in its first few weeks of trading, shares of Alibaba have bounced back. Alibaba stock traded above $100/share on Monday on rumors of a partnership with Apple over payment systems. Alibaba founder Jack Ma said at a conference this week that he would be “very interested” in partnering with Apple’s newly launched Apple Pay product. Like Apple Pay, Alibaba has its own AliPay system.

Alibaba will release earnings on November 4. Analysts expect the company to report sales of $2.55 billion for the quarter.

Yahoo, the parent company of Yahoo Finance, owns a 16% stake in Alibaba.