Alibaba Group Holding Ltd (BABA): Add On Weakness Down Towards $100.00

alibabaGeorge Leong:  The much-anticipated debut of Chinese Internet powerhouse Alibaba Group Holding Limited (NYSE:BABA) has arrived and gone.

Even if you missed out on getting your hands on China-based Alibaba at its pre-initial public offering (IPO) price, you could still have purchased the stock at $82.81 on October 15 and made more than a 30% gain in two weeks. The stock traded at a record on Wednesday, as excitement continues to hold and gain traction in the U.S. stock market.

With the gain and a market cap in excess of $265 billion, Alibaba is now bigger than Facebook, Inc. (NASDAQ/FB), but about $100 billion short of Internet king Google Inc. (NASDAQ/GOOG).

The valuation of Alibaba is in line with the 39-times (X) earnings-per-share (EPS) valuation of Facebook, but more expensive than the quite attractive 18X EPS belonging to Google, which continues to be my top pick in the Internet space.

While Alibaba does look somewhat top-heavy, don’t forget that we are talking about the Internet space, which tends to demand higher multiples than the technology sector. And in China, the Internet is huge.

Alibaba may be new to investors and Internet users in the U.S., but the company has a significant following in China—the biggest Internet market in the world with about 632 million users, according to the China Internet Network Information Center. Plus, mobile usage of the Internet is at a staggering 527 million users in China.

As far as Alibaba’s users, the company had about 217 million active mobile users in September, which is huge. The growth of 139% year-over-year is massive.

In the third quarter, Alibaba’s first as a public company in the United States, the company reported revenue growth of 54% year-over-year to $2.74 billion. The key mobile revenue metric was staggering with revenues of $606 million, up 1,020% year-over-year.

Alibaba did record weaker-than-expected earnings, as the company spent heavily in the mobile development, marketing, and other new, strategic areas.

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