Alibaba's Valuation Is Very Fair: Oberweis' Papp

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May 7 (Bloomberg) -- Oberweis Asset Management's Jeff Papp and Bloomberg's Cory Johnson discuss Alibaba's landmark IPO with Betty Liu on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Valuation we are talking about might be up to almost $200 billion or so.

It's pretty fair?

I think it is very fair.

We have to remember a few things.

Number one, the huge scale of the company.

We are talking 50 billion in market value, which is difficult to comprehend.

Second is the unique operating model.

When we see other companies they try to earn a few commission dollars by selling online.

They recognized there was lack of infrastructure which allowed them to build the largest shopping mall.

The way they have gone about charging people is they charge merchants for product paceman.

This sounds good because merchants pay higher and higher prices for placement, but alibaba doesn't have to continue to buy land.

Their profit margins are superior.

The growth story sounds good, but are we being blinded by their growth?

This is one of the rare cases . there is no reason to suggest they wouldn't. there is a lot of free cash flow.

This is not a business where the bottom line doesn't exist as we have seen in so many recent technology ipos.

This is a business that makes a lot of money.

It is making more money every quarter.

If you look at the operating profit growth, it has grown every year.

The numbers are interesting.

The numbers don't really help explain what is going on.

You have a very profitable business.

As fast as revenues are growing profits are growing even faster.

That sounds impressive.

If you want to get into the chinese internet story now, there are several stocks you can do that with?

I think there are.

Alibaba is going to be the best one.

We have been investing in china for almost nine years now and have seen almost all these ipos go public in the states and even in hong kong.

Alibaba is the best we have seen, the best margin story.

It is the biggest.

What is it really playing on the back of?

It's playing on the back of chinese consumer spending.

I don't inc.

Chinese consumer spending is a macro point highly debated in the world.

They are going to continue to spend money, and the place of choice to spend money is through alibaba.

What about other recent chinese companies?

Why haven't they done as well?

They have unique assets themselves.

They have yet to be able to prove to make money.

Twitter is a widely accepted platform, but what is the model in terms of how they can make money.

When you talk to the weibo guys their first priority is to grow users.

When you compare that to alibaba, we are seeing a huge number of profits and are rated.

A huge amount of cash being generated as well.

Can you imagine other chinese giants will come to the u.s. market?


I think there is the notion that everything grows in china isn't true.

There have been some really crummy companies that have come out of china.

They run up billion dollar valuations that turn into zero

This text has been automatically generated. It may not be 100% accurate.


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