Alibaba: Short-Term Bear, Long-Term Bull

Alibaba Group Holding Ltd BABA has witnessed lots of volatility in the last few days on back of a plethora of news, both good and bad, concerning the company. On March 18, 429 million new shares of the company will hit the market, more than what the company sold in its IPO, and there's growing fear among some analysts that it could drive the stock lower.

Rob Sanderson, MKM Partners senior analyst, and Jeff Kilburg, KKM Financial CEO, were recently on CNBC to discuss the outlook for Alibaba and how the reports on "brushing" will impact the stock.

Related Link: Alibaba Shareholders Bracing For First Major Lockup Expiration

Short-Term Bear

“Short-term, I am bearish; long-term, there's lots of great reasons to own Alibaba,” Kilburg said. “Look at it today, there's splashing in the United States and Silicon Valley. They are going to dive into the $100 billion cloud industry market, but in the short-term they are in a price discovery mode.”

He continued, “Look at the IPO price of $68. I think we go back there to test this as these lock-ups online, because right now we saw the biggest gain of the year since the IPO yesterday, but we also saw an 80 print on Tuesday. So, we are seeing tremendous volatility.”

Brushing Won't Affect P&L

Sanderson was asked how the recent reports of “brushing” are going to impact the company. He replied, “Look, the practice of brushing is to artificially inflate your ranking here is no impact to the P&L. It overstates the GMV potentially.

“So, the gross merchandise value that is reported, that's not a financial metric. That's a metric of volume of merchandise moving through the network.”

He explained further, “This is a huge marketplace; there's a billion active listings, 8.5 million active sellers. People are going to try to do bad things, whether it's online commerce, offline commerce, anything. It's human nature. There will be bad actors. It's not an Alibaba-specific problem.”