Valuation and Market Estimation of Alibaba Prospects

Question

This question concerns Alibaba the internet e-commerce firm that recently went public. It is an open ended question that requires you to utilize the valuation techniques you have learnt in the course and also to do independent research.

• Research Alibaba’s business model, particularly its sources of revenue and its profit margins. What sort of revenue growth do you think it will be able to maintain in the next ten years? Do you think it will be able to maintain its current profit margins?
• Study the attached valuation spreadsheet. Input your predicted revenue growth rates and profit margins to come up with your valuation of Alibaba. You could use a range of values and also do a sensitivity analysis.
• How does your range of valuations compare the valuations based on the recent movements of the Alibaba share price? What do the current share price movements tell you about the market’s estimation of Alibaba’s prospects?

Summary: This question is related to a case study on Alibaba the internet e-commerce firm and discusses about Alibaba’s business model, revenue growth rates and profit margins and market’s estimation of Alibaba’s prospects.

Answer is in Excel format