Alibaba’s Valuation: Bargain of the Decade or a Value Trap in Disguise?
Alibaba's stock price has investors scratching their heads—is this a fire sale or a flaming red flag?
Bulls vs. Bears: The $250B Question
China's e-commerce giant trades at P/E ratios not seen since its IPO. Growth concerns? Regulatory overhang? Or just Wall Street being its usual melodramatic self?
The Regulatory Guillotine Hangs
Beijing's tech crackdown turned BABA from market darling to whipping boy overnight. But with Ant Group's restructuring complete, is the worst really over?
Cash Flow Conundrum
Cloud division growing 30% YoY. International commerce up 45%. Yet the stock acts like the company's selling rickshaws instead of running the world's third-largest cloud infrastructure.
Cheap for a Reason?
‘When something looks too good to be true…’ muttered every hedge fund manager who got burned by China plays. But at these valuations, even the cynics are starting to peek.
Closer: In a market where Tesla trades at 70x earnings for 20% growth, Alibaba at 8x for 30% growth might just be the ultimate contrarian play—or proof that geopolitics trumps fundamentals. Your move, ‘smart money.’
Image source: Getty Images.
But today, Alibaba's stock trades at around $120. That decline was caused by two major challenges. First, China's antitrust regulators hit its e-commerce business with a record fine in 2021 and shackled it with new restrictions. Those setbacks eroded Alibaba's defenses against fierce competitors likeand. Second, the macro headwinds in China disrupted the growth of its e-commerce and cloud businesses.
From fiscal 2022 to 2025, Alibaba's revenue and adjusted net income both grew at a CAGR of 5%. That slowdown convinced many investors its high-growth days were over, but its stock now trades at just 16 times this year's earnings. The bulls argue that the valuation is too cheap to ignore, while the bears claim its risks justify that lower multiple. Let's see which argument makes more sense.
Is Alibaba's business finally stabilizing?
Over the past year, Alibaba's revenue growth broadly stabilized, its operating margin ROSE to the double digits, and its adjusted EPS growth turned positive again.
|
Revenue growth (YOY) |
7% |
4% |
5% |
8% |
7% |
|
Operating margin |
7% |
15% |
15% |
15% |
12% |
|
Adjusted EPS growth |
(5%) |
(5%) |
(4%) |
13% |
23% |
Data source: Alibaba. In CNY terms. YOY = Year-over-year. Fiscal years end March 31.
For the full year, its revenue and adjusted EPS rose 6% and 5%, respectively. That still represented a slowdown from its 8% revenue growth and 14% adjusted EPS growth in fiscal 2024, but it indicated its business was gradually stabilizing.
That stabilization was supported by the growth of its overseas e-commerce marketplaces (Lazada in Southeast Asia, Trendyol in Turkey, Daraz in South Asia, and AliExpress for its cross-border purchases), which offset Taobao and Tmall's softer growth in China; the expansion of its logistics business for third-party customers, and AI-driven tailwinds for its cloud business. It also bought back 5.1% of its shares for $11.9 billion in fiscal 2025, and it plans to allocate a lot more cash to its future buybacks.
From fiscal 2025 to 2028, analysts expect Alibaba's revenue and EPS to grow at a CAGR of 7% and 11%, respectively. That growth should be driven by its recent catalysts, new live streaming features and more competitive discount offerings for its domestic marketplaces, and potential spinoffs or initial public offerings (IPOs) for its cloud and logistics divisions. A favorable trade deal between the U.S. and China WOULD also alleviate some pressure on the Chinese economy and ignite fresh consumer and cloud spending.
So is Alibaba's stock too cheap to ignore?
Alibaba's high-growth days are probably over, and it still faces plenty of macro, competitive, and regulatory challenges. But if you expect the trade tensions to eventually ease, China's economy to keep growing, and for Alibaba to stay at the top of its expanding e-commerce and cloud markets, then its stock seems too cheap to ignore at these levels.
