BABA's Strong Value Proposition and Growth Potential
Alibaba presents undeniable deep value opportunities, thanks to its diverse capabilities spanning e-commerce, logistics, cloud computing, AI, autonomous driving, and fintech. This broad expertise may also explain why Apple has partnered with BABA’s Qwen2.5-VL model in China, complementing its global collaboration with OpenAI
Qwen2.5 has already demonstrated superiority over other leading AI models, including DeepSeek, OpenAI’s GPT4o, Anthropic’s Claude 3.5 Sonnet, and Google’s Gemini 2.0 Flash. Despite the recent rally fueled by Apple’s endorsement, BABA still holds significant upside potential, with its stock remaining undervalued.
An Undervalued Opportunity for Investors
In a previous analysis of Alibaba, we highlighted its strong recovery potential, supported by improving US China relations and favorable policy developments expected in 2025. BABA’s powerful AI capabilities, international e-commerce expansion, and robust free cash flow generation reinforce its long-term investment appeal.
Since our last coverage, the stock has surged by 40%, far outperforming the broader market’s 2.9% gain and outpacing many of its industry peers. This growth is partly due to improving geopolitical sentiments, particularly signals of a softer stance from US leaders and China’s top diplomats.
Despite ongoing concerns about emerging AI competitors like DeepSeek, we believe the market has overreacted. BABA's Qwen2.5-VL model has proven itself against major rivals, making it a formidable AI player. Apple’s decision to incorporate BABA’s AI for iPhones in China further solidifies its leading position in the region. Given that China accounts for over 17% of Apple’s revenue, this partnership could unlock new growth opportunities for both companies.
Moreover, BABA’s cloud division continues to expand, with revenue hitting $4.21 billion in Q2 FY2025, reflecting a 15.3% quarter-over-quarter and 11.3% year over year growth. AI related revenues have seen triple-digit growth for five consecutive quarters, further emphasizing the company’s strong position in the AI-driven cloud computing sector.
Growing Investments in AI Infrastructure
BABA’s rising capital expenditures, reaching 46.36 billion yuan over the last 12 months (a 151.8% increase), underscore its commitment to AI infrastructure. Despite US export bans on Nvidia (NVDA) chips, Chinese researchers have achieved performance breakthroughs using domestic GPUs, suggesting BABA will remain competitive in cloud computing.
Valuation and Investment Outlook
BABA’s stock remains attractively priced, with a forward price-to-earnings (P/E) ratio of 13.76x, well below its pre-crackdown five-year average of 28x. While the stock has recovered from its December 2023 lows, improving investor sentiment could drive further gains.
Currently, BABA is trading in the $124 range, retesting its 2022-2024 highs. With an estimated fair value of $180 and a bullish target of $300, the stock has substantial upside potential. However, geopolitical uncertainties, tariff tensions, and broader market volatility could create near-term headwinds. at this point of my trading journey I can predict everything and everyone but Trump!
Alibaba presents undeniable deep value opportunities, thanks to its diverse capabilities spanning e-commerce, logistics, cloud computing, AI, autonomous driving, and fintech. This broad expertise may also explain why Apple has partnered with BABA’s Qwen2.5-VL model in China, complementing its global collaboration with OpenAI
Qwen2.5 has already demonstrated superiority over other leading AI models, including DeepSeek, OpenAI’s GPT4o, Anthropic’s Claude 3.5 Sonnet, and Google’s Gemini 2.0 Flash. Despite the recent rally fueled by Apple’s endorsement, BABA still holds significant upside potential, with its stock remaining undervalued.
An Undervalued Opportunity for Investors
In a previous analysis of Alibaba, we highlighted its strong recovery potential, supported by improving US China relations and favorable policy developments expected in 2025. BABA’s powerful AI capabilities, international e-commerce expansion, and robust free cash flow generation reinforce its long-term investment appeal.
Since our last coverage, the stock has surged by 40%, far outperforming the broader market’s 2.9% gain and outpacing many of its industry peers. This growth is partly due to improving geopolitical sentiments, particularly signals of a softer stance from US leaders and China’s top diplomats.
Despite ongoing concerns about emerging AI competitors like DeepSeek, we believe the market has overreacted. BABA's Qwen2.5-VL model has proven itself against major rivals, making it a formidable AI player. Apple’s decision to incorporate BABA’s AI for iPhones in China further solidifies its leading position in the region. Given that China accounts for over 17% of Apple’s revenue, this partnership could unlock new growth opportunities for both companies.
Moreover, BABA’s cloud division continues to expand, with revenue hitting $4.21 billion in Q2 FY2025, reflecting a 15.3% quarter-over-quarter and 11.3% year over year growth. AI related revenues have seen triple-digit growth for five consecutive quarters, further emphasizing the company’s strong position in the AI-driven cloud computing sector.
Growing Investments in AI Infrastructure
BABA’s rising capital expenditures, reaching 46.36 billion yuan over the last 12 months (a 151.8% increase), underscore its commitment to AI infrastructure. Despite US export bans on Nvidia (NVDA) chips, Chinese researchers have achieved performance breakthroughs using domestic GPUs, suggesting BABA will remain competitive in cloud computing.
Valuation and Investment Outlook
BABA’s stock remains attractively priced, with a forward price-to-earnings (P/E) ratio of 13.76x, well below its pre-crackdown five-year average of 28x. While the stock has recovered from its December 2023 lows, improving investor sentiment could drive further gains.
Currently, BABA is trading in the $124 range, retesting its 2022-2024 highs. With an estimated fair value of $180 and a bullish target of $300, the stock has substantial upside potential. However, geopolitical uncertainties, tariff tensions, and broader market volatility could create near-term headwinds. at this point of my trading journey I can predict everything and everyone but Trump!
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Alibaba reported Q4 results (fiscal year ending March) that came in slightly below expectations. Revenue rose 7% year over year to $32.6 billion, missing estimates by $740 million, while earnings per share landed at $1.73, about $0.05 below consensus. While this marks a double miss, the underlying business tells a more nuanced story of transformation, resilience, and strategic repositioningThe standout performer was Alibaba Cloud, which saw revenue accelerate to 18% year over year growth. This marks its seventh straight quarter of triple-digit growth in AI-related services, driven by surging demand for compute infrastructure and AI models. The company doubled down on its artificial general intelligence (AGI) ambitions, unveiling its latest large language model, Qwen 3, and expanding the reach of its AI-powered assistant, Quark, as it competes with Tencent, Baidu, and fast-rising DeepSeek in China’s AI race.
Core commerce remains Alibaba’s financial backbone and showed signs of stability. Revenue from Taobao and Tmall grew 9%, underpinned by a 12% increase in customer management revenue and higher take rates, reflecting better monetization and advertiser demand. The company is also pushing aggressively into “instant commerce”—offering one-hour delivery for select goods and services, while deepening partnerships with platforms like Xiaohongshu to drive user engagement and social commerce
On the global front, international commerce rose 22%, a strong figure though a slight deceleration from the previous quarter, indicating some cooling in overseas momentum.
On profitability, net income nearly quadrupled, though off a low base, signaling improving operational efficiency. However, free cash flow dropped by 76%, largely due to significant capital investment in AI infrastructure, including cloud capacity and model development. This reflects a longer-term strategy shift rather than near-term weakness, though it does raise questions about short-term return on investment.
a cooling domestic economy, ongoing tariff and regulatory uncertainty, and fierce competition from fast-moving rivals like PDD (Pinduoduo), JD .com, and ByteDance. The company’s future hinges on its ability to turn AI and logistics investments into durable, monetizable platforms—not just growth stories
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🟣MasterClass moonypto.com/masterclass
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🔵News t.me/moonypto
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🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.