Alibaba Stock in 2026: Bullish Breakout or Regulatory Wreckage?
Alibaba's fate hangs between China's regulatory claws and global expansion ambitions—investors are betting the house on which force wins.
Regulatory Rollercoaster
Beijing's crackdowns sliced Alibaba's valuation by half since 2020—but whispers of eased policies fuel optimism. The government's recent tech sector support signals suggest fewer surprises, though trust remains fragile.
Cloud & AI Gambit
Alibaba Cloud dominates Asia-Pacific markets—aggressive AI investments aim to challenge AWS and Azure globally. Their open-source models grab developer mindshare, yet monetization lags behind U.S. rivals.
International Expansion
Lazada and AliExpress push into Latin America and Europe, exploiting Amazon's weak spots in emerging economies. Cross-border commerce revenue jumps—but trade wars loom as Western protectionism grows.
E-commerce Resilience
Domestic consumption rebounds as China's middle class spends again—Taobao live-streaming sales smash records despite Pinduoduo's threat. Logistics arm Cainiao’s IPO could unlock hidden value.
Financial analysts project 20% upside if macro conditions stabilize—or another 30% crash if geopolitical tensions flare. As one hedge fund manager quipped: 'Trading BABA is like betting on black while knowing the roulette wheel has extra zeros.'
The business model works
Its flagship e-commerce business is a cash cow in China. Taobao and Tmall are its consumer-to-consumer and business-to-consumer platforms, respectively. They combined for $62 billion in fiscal 2025, or 45% of Alibaba's $137 billion in consolidated revenue.
The bigger point here is that those two platforms accounted for $27 billion -- or 113% -- of the company's consolidated $23.8 billion in adjusted earnings before interest, taxes, and amortization (EBITA). In other words, the profitability of its Chinese e-commerce efforts is funding the balance of the rest of its money-losing businesses.
So when you begin to ding Alibaba because of the impact of rising consumer-facing prices on AliExpress for stateside shoppers, connect the dots. All of Alibaba's international e-commerce business takes up a modest 13% slice of the top line, and the U.S. is just one part of that segment. It's also losing money, so it might be better for the bottom line if it leans even more on milking its cash cows.
This doesn't mean that all of these side bets are more trouble than they're worth. Alibaba is investing in everything from artificial intelligence to food delivery.
It announced on Thursday that it will be spinning off the autonomous-driving technology company that it owns 45% of and is no longer consolidated on its books. It's about to become found money. Even its Youku video streaming platform that has historically been a drag on the bottom line recently turned profitable.
Image source: Getty Images.
Alibaba can afford to spread its chips across the table. When your flagship business has an adjusted EBITA margin of 44%, there's a lot of cash FLOW to go around.
Management is targeting $7 billion in promotions to make its fast-growing food delivery business even more ubiquitous. It's also returning money to its shareholders. It has engaged in share buybacks in each of the last eight quarters. There's also a modest 0.9% dividend yield.
Ultimately, the best case for Alibaba continuing to beat the market in the year ahead is that it's so cheap. It is trading for 14 times this new fiscal year's adjusted earnings and less than 11 times next year's target. Its recent move to invest in the third-party food delivery market may hurt the bottom line in the NEAR term, but the company is a smart collection of plays on the future. Don't forget about its cash-rich balance sheet.
Alibaba is a company that you don't want to bet against it -- even if it's growing slower on the top line these days.
