$BABA Alibaba – the madness of crowds

$BABA (Alibaba) shares traded up 3.25% to $103.29. It has a market cap of $249b. It’s annual revenues for 12 m/e 31 march 2014 was 52.504b CNY (8.45b USD). That gives it a PSR of around 30. Doesn’t it occur to investors that a $249b company cannot legitimately grow at rates which justify a price to sales ratio of 30? Revenues were 11.9b CNY for 12 m/e 31 march 2011. That’s an an annualised growth rate of 64%. Has no-one reflected on the sheer improbability of this for such a large company? Alibaba is a China-based online and mobile commerce company. Valuewalk recently posted an article ( http://bit.ly/1yMZ2vj ) saying that BABA was in talks to buy a stake in an insurer. What is the business case for an e-commerce website buying an insurance website? It’s a rhetorical question, of course. The answer is: none at all. All other answers are wrong. Investors are going to get burned. Badly. There is no other possible outcome. If I were Yahoo, I’d start offloading. What we are seeing here is the utter insanity of crowds. $103.29

Edit 24-Jan-2015: Minor rewording

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About mcturra2000

Computer programmer living in Scotland.
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