Buying into Alibaba IPO—and beyond: Pros

With its initial public offering ahead, Alibaba might take a while to grow into its full valuation, Rob Sanderson of MKM Partners said Monday.

Sanderson, who has a "buy" recommendation on Yahoo for its exposure to the Chinese e-commerce giant, said that the IPO was just the beginning.

Yahoo owns a 24 percent stake in Alibaba, which is expected to go public at $60 to $66 per share, giving it a valuation around $160 billion.

"I think there's a very bright future for Alibaba," Sanderson said on CNBC's "Halftime Report."

Acknowledging that a sum-of-the-parts analysis can be "frustrating," Sanderson took a broader view of the stock.

"There are many examples where the sum of the parts is never fully reflected in valuation until there's a liquidity event," he said. "And here, I think, there's another giant swing factor. Let's not overlook the potential for tax efficiency on the second half of the spin. And there's an enormous amount of value for Yahoo shareholders should there be a tax-efficient mechanism to distribute the Alibaba portion."

An employee walks past the Alibaba logo at the company’s headquarters outside of Hangzhou, China.
Carlos Barria | Reuters
An employee walks past the Alibaba logo at the company’s headquarters outside of Hangzhou, China.

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The size of the IPO, which is expected to raise more than $20 billion, might prevent Alibaba stock from seeing a big increase right away, said Kathleen Smith of Renaissance Capital.

Smith, who manages the company's IPO exchange-traded fund, said, "Our studies show that the very large IPOs don't necessarily have those large pops. …

"I think this deal, because it's so enormous, will take some time to get into portfolios and into indices. And so, we wouldn't be expecting a huge jump up after the pricing."

Among the "Halftime Report" traders, OptionMonster's Pete Najarian said that he was bullish on the IPO.

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"I would be a buyer of Alibaba," he said.

Najarian said that he owns shares of Yahoo and plans to sell about half his holdings after the Alibaba IPO.

TheStreet CIO Stephanie Link said that she could see why someone would buy into the IPO.

"I think for what you're getting, you can make a case to own it right from the beginning, as long as they don't beef up the price," she said.

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Ritholz Wealth Management CEO Josh Brown said that the sector's potential was significant, with a Chinese Internet user base of around 630 million people and growing.

"You don't have to buy Alibaba. There are plenty of other Chinese Internet companies, and they become more legitimate with every passing day," he said. "I think the sector is a home run."

By CNBC's Bruno J. Navarro