Wait until BABA reports a break-even quarter, and people will begin to realize that this is all imaginary. Fundamental business and economic theory dictates that internet retailers will never make money. It's an outstanding example of perfect competition.
The crash is coming, but it's still some time off. This time it will be centered in the internet retailing sector.
When people look at Alibaba, they don't realize that there are a few hundred thousand small internet retailers that are nipping at the heels of the larger companies. Amazon has been unsuccessfully trying to make money for about 20 years now. It's the classic case of a company which losses money on every transaction, but tries to make it up on volume.
The trigger will be a small interest rate increase by the Fed, primarily in response to growing inflation expectations. Investors will reset growth expectations, and most internet companies will drop like a rock.
In the interim, BABA could rise another 30%. That will be considered to be confirmation that unreasonable expectations are reasonable, which is a product of group think. This now has all the characteristics of a bubble.
This is very similar to 1999. Relatively speaking, BABA is a great company, but intense competition within the internet distribution segment guarantees that it will never make enough money to justify its current price. Within a couple years this stock will see $30 or less.
If JD is able to recover a small amount due to a reduction in Chinese interest rates, more new shares will come to market. It's a matter of whether the stock will fall now, or fall later.
All internet stocks are too high. It's been 14 years since this last happened.
Internet retailers are in a more competitive environment than restaurants, and restaurants fail more often than any other business.
BABA was not able to establish a short-term bottom because of the influence of the debt offering. It may now be able to fall to the $100 level at which I expect it will bottom.
MM just spent some of the Alibaba money paying off Mozilla, which will help her negotiate with MSFT. Yahoo needs MSFT more than MSFT needs Yahoo.
Here's a dose of reality:
"Open source pioneer Mozilla has signed a five year deal with Fading Internet giant Yahoo which will mean Microsoft’s Bing will replace Google as Firefox’s search engine, at least in the US.
"The world has changed. The "strategic five year partnership" makes Yahoo the default search “experience” for Firefox in the US on mobile and desktop. The agreement also “provides a framework for exploring future product integrations and distribution opportunities to other markets.”
"It is a major move for Mozilla. Firefox, once regarded as the browser of choice for people who wanted to escape from Microsoft’s Internet Explorer. It is, in a sense, sleeping with the enemy. Mozilla's deal is with Yahoo, rather than Microsoft, but Yahoo no longer does search technology and has used Microsoft's Bing since 2009.
"It may feel it has no choice. Firefox’s share of the browser market has declined significantly in recent years, largely because of the phenomenal growth of Google’s Chrome, which has supplanted Microsoft’s Internet Explorer as the world’s most popular browser."
If JD drops to the $15 level before the lockup expires, there will be fewer sellers, but short expectations will be realized.
Why would anyone think that Amazon could ever make money when the internet market is quickly approaching a condition of pure competition? One of these days the value of Amazon stock will collapse.
There are now so many internet sellers that the chance that any will make money is a fat zero.