I didn't comment on Alibaba's financials. I simply responded to the statement that "there's not a lot of splashy IPOs happening," which I found somewhat amusing in light of the fact that the arguably "splashiest" IPO just took place.
That said, Alibaba's profitability and PE ratio compared to Amazon is meaningless in the context of a bubble discussion. A bubble does not merely consist of unprofitable companies becoming ridiculously valued; it consists of profitable companies becoming more highly valued than their fundamentals can support.
If Amazon's stock price fell by 25%, and Alibaba's did the same, as an Alibaba shareholder would you take comfort in the fact that Alibaba still has a PE ratio one tenth Amazon's? Of course not.
If Amazon's stock price fell by 25%, and Alibaba's did the same, as an Alibaba shareholder would you take comfort in the fact that Alibaba still has a PE ratio one tenth Amazon's? Of course not.
Actually, yes, I would take comfort in that fact. It would mean that Alibaba was far more likely to recover its value.
It would mean that Alibaba was far more likely to recover its value.
You seem to misunderstand what the PE ratio actually represents.
As an experiment, I'd suggest you test your hypothesis against actual market data. Hint: you will have no problem finding stocks with higher than industry average PE ratios pre-2008 crash that have significantly outperformed their lower PE ratio counterparts since the market bottom in 2009.
Comments
I didn't comment on Alibaba's financials. I simply responded to the statement that "there's not a lot of splashy IPOs happening," which I found somewhat amusing in light of the fact that the arguably "splashiest" IPO just took place.
That said, Alibaba's profitability and PE ratio compared to Amazon is meaningless in the context of a bubble discussion. A bubble does not merely consist of unprofitable companies becoming ridiculously valued; it consists of profitable companies becoming more highly valued than their fundamentals can support.
If Amazon's stock price fell by 25%, and Alibaba's did the same, as an Alibaba shareholder would you take comfort in the fact that Alibaba still has a PE ratio one tenth Amazon's? Of course not.
If Amazon's stock price fell by 25%, and Alibaba's did the same, as an Alibaba shareholder would you take comfort in the fact that Alibaba still has a PE ratio one tenth Amazon's? Of course not.
Actually, yes, I would take comfort in that fact. It would mean that Alibaba was far more likely to recover its value.
You seem to misunderstand what the PE ratio actually represents.
As an experiment, I'd suggest you test your hypothesis against actual market data. Hint: you will have no problem finding stocks with higher than industry average PE ratios pre-2008 crash that have significantly outperformed their lower PE ratio counterparts since the market bottom in 2009.