Alibaba: Take Advantage Of The Current Setback

Daniel Schönberger
13.44K Followers

Summary

  • Alibaba remains a long-term Buy, with strong growth potential in e-commerce, cloud, and AI despite heavy near-term investment and margin pressure.
  • Alibaba's Q2/26 revenue grew 4.8% year-over-year, but operating income and free cash flow declined sharply due to aggressive investments in quick commerce and technology.
  • The Cloud Intelligence Group posted 34.5% revenue growth, with AI-related products achieving triple-digit growth for the ninth consecutive quarter, underpinning future expansion.
  • Valuation remains attractive: intrinsic value estimates range from $206.86 to $289.75, with Alibaba trading well below its all-time high and expected to outperform the market.

Alibaba company office in China

Robert Way/iStock Editorial via Getty Images

In early September 2025, I wrote my last article about Alibaba Group Holding Limited (BABA) and although I did not rate the stock as a “Strong Buy” anymore, I remained absolutely bullish about

Quick Insights

  • Heavy investments in AI, cloud, and quick commerce are depressing near-term margins and free cash flow, but are expected to drive high single- to double-digit growth and margin recovery over the long run.

  • E-commerce growth is propelled by quick commerce and 88VIP retention, cloud by AI-related products and public cloud adoption, and international expansion targets Southeast Asia and Europe.

  • BABA trades at 21.6x earnings and 20.2x free cash flow, with DCF-based intrinsic value estimates between $206.86 and $289.75, suggesting material undervaluation relative to growth prospects.

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About BABA Stock

SymbolLast Price% Chg
BABA
155.96-1.37%
Pre157.270.84%
Chart
Chart with 160 data points.
The chart has 1 X axis displaying Time. Data ranges from 2025-12-04 09:30:00 to 2025-12-09 16:00:00.
The chart has 1 Y axis displaying values. Data ranges from 154.73 to 159.14.
End of interactive chart.
Market Cap
$353.32B
PE (FWD)
23.95
Yield
1.26%
Rev Growth (YoY)
5.21%
Short Interest
1.79%
Prev. Close
$158.13
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SymbolLast Price% Chg
BABA
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Pre:157.270.84%
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Chart
Line chart with 2 lines.
The chart has 1 X axis displaying Time. Data ranges from 2025-12-04 09:30:00 to 2025-12-09 16:00:00.
The chart has 1 Y axis displaying values. Data ranges from -7.79 to 0.79.
End of interactive chart.

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