3 ms·

I'll paraphrase a comment I wrote on reddit about this yesterday. Alibaba has a PE ratio one tenth of amazon - and is already a profitable company. This is the

by nmjohn 12y ago

I'll paraphrase a comment I wrote on reddit about this yesterday. Alibaba has a PE ratio one tenth of amazon - and is already a profitable company. This is the exact opposite of what a bubble is. This is not at all like the kind of IPOs leading to the 2000 crash.

7Figures2Commas 12y ago
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.
- goodcanadian 12y ago
  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.
  - 7Figures2Commas 12y ago
    > 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.

3 ms·

I'll paraphrase a comment I wrote on reddit about this yesterday. Alibaba has a PE ratio one tenth of amazon - and is already a profitable company. This is the

by nmjohn 12y ago

7Figures2Commas 12y ago
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.
- goodcanadian 12y ago
  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.
  - 7Figures2Commas 12y ago
    > 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.