Wedbush On Alibaba-Snapchat: Makes More Sense Than It Initially Looks

Speaking to Benzinga, Wedbush analyst Gil Luria commented on Alibaba Group Holding Ltd (NYSE: BABA) $200 million investment in Snapchat.

Luria said that the deal "makes a lot more sense than it may look [like] initially" as the analyst explained how Alibaba also invested in Weibo Corp (ADR) (NASDAQ: WB), a social media platform in China.

Alibaba has "quite a bit of expertise in how to make that connection between mobile-intensive social media and e-commerce," according to Luria

The analyst said that through such an investment, Alibaba could "put a foothold" in the U.S. market without having to compete directly with Amazon.com, Inc. (NASDAQ: AMZN) and eBay Inc (NASDAQ: EBAY).

Related Link: How Would The Alibaba-Snapchat Deal Impact Both Companies?

"We don't know yet how Snapchat is going to get involved in e-commerce but Alibaba will be able to be a very good advisor in how to approach that problem," however, Luria noted that neither Facebook Inc (NASDAQ: FB) nor Twitter Inc (NYSE: TWTR) "had figured out how to introduce commerce in a significant way."

Luria also noted that Snapchat is behind other companies in how to introduce e-commerce in social media so it would still be a number of years before the company could make advancement in that area; however, Alibaba would have a stake in Snapchat and be able to guide the initiative.

Alibaba recently traded at $81.87, down 0.15 percent.

Kevin Riley and Brianna Valleskey contributed to this report.