Ali BaBa shares rose on the first day to come up with proof of performance required to maintain the valuation.

September 21 news, according to "Wall Street Journal" Online analysis of articles published on Friday, said Alibaba Group shares rose on the first day, worth more than its competitors. Alibaba wants to maintain this valuation, investors will need to come up with more satisfactory growth and profitability. The following is a summary of the article: Alibaba IPO shares are discount promotion to the investor, but this discounted price before more investors into the NYSE has ceased to exist.

Ali BaBa

Ali BaBa shares rose on the first day to come up with proof of performance required to maintain the valuation

Alibaba IPO first-day closing price 38% higher than the issue price of $ 68. If the underwriters exercise the over-allotment option, Alibaba fully diluted market capitalization will reach $230 billion. This is the result of Alibaba wants. The electricity supplier giant outset sought to avoid the first day of listing shares fell suffered embarrassment, so choose a conservative pricing.

According to underwriters expected, Alibaba issue price corresponds to 2015 expected earnings of 25 times earnings. Financial information provider FactSet data show, Tencent, Baidu shares correspond to expected earnings in 2015 were 29 times earnings and 27 times. Thus, a relatively conservative pricing Alibaba. But with Friday's stock price rose, Alibaba fully diluted shares corresponding 2015 expected earnings of 32 times earnings.

Challenge:

After the IPO, Alibaba will face market scrutiny, must prove its valuation. Growth prospects face competition and profit targets will be the focus of market attention. In order to meet analysts' expectations, Alibaba coming years will need to maintain annual revenue growth at 30-35%, basic e-commerce industry and the expected growth rate is consistent.

So far, e-commerce basically not affected China's economic slowdown. But if the Chinese economy continues to slow, e-commerce will inevitably not be affected. Alibaba said it expects average spending per user will grow, but if the company's expansion to China less developed regions, the average user spending is likely to decline.

Moreover, 80% of Alibaba's dominant market share is difficult to be maintained. Alibaba is facing a major threat from the fashion or cosmetic professional website. China's second-largest electricity supplier platform Jiangdong logistics industry has been investing heavily in order to achieve fast and convenient delivery, and reached a cooperation with Alibaba rival Tencent.

Tencent and other rivals, as well as expansion into new areas ambitions, will put pressure on margins Alibaba. Operating margin Alibaba latest quarter has fallen from 51 percent to 43 percent in the first quarter of 2013. During the week roadshow, Executive Chairman Jack Ma of Alibaba express to the United States and Europe, the rapid expansion of the will. This expansion will certainly lead to a lot of costs, further drag on profitability.

Market research firm Morningstar give Alibaba $223 billion valuation that the electricity supplier giant operating margin will rebound to 48% in 2018. But if Alibaba operating margins continued to decline, it can not support this valuation.

Able to put such a complex company successfully into the capital market, Alibaba commendable. Perfect time is one of the factors listed Alibaba successful IPO. Alibaba IPO in the day, the Nasdaq Composite Index approaching a maximum value of 14 years, only one step away from the highest closing value of the February 2000 hit.

In this situation, Alibaba needs to produce dazzling performance expectations.