Company Overview:
Alibaba Group Holding Ltd. (BABA) is one of the world's largest online commerce businesses in the world. BABA operates its e-commerce business for third parties and does not engage in the direct sales or hold inventory. BABA is the holding company for six business units: Taobao and Tmall Group (43% of FY 24 sales), Alibaba International Digital Commerce (10%), Local Services (6%), Cainiao Smart Logistics Network (10%), Cloud Intelligence Group (10%), and Digital Media and Entertainment (2%). BABA also possess a cloud business, that consists of Alibaba Cloud and DingTalk. Alibaba’s cloud service is China’s largest public cloud infrastructure and offers a complete set of cloud services such as proprietary servers, elastic computing, storage, network, security, database, and big data.
Bulls Say:
Alibaba demonstrates strong fundamental valuation, boasting a P/E ratio of 15.80, which is notably lower than that of competitors like Amazon and MercadoLibre.
Despite macroeconomic risks, including trade wars, Alibaba is poised for continued growth due to its strong focus on the Chinese market and minimal reliance on international operations.
Under the leadership of CEO Eddie Wu, the company has cultivated a dynamic growth environment by promoting younger employees who are more attuned to evolving consumer trends and preferences
Bears Say
Poor relations between China and the United States could put a stop to Alibaba’s global ambitions
The Chinese government’s golden share in Alibaba poses a threat to the independence and ownership of Alibaba
Alibaba is operating in a highly competitive environment, facing risks from competitors such as PDD and JD.com
Industry Outlook:
As of the last fiscal year, China’s annual per capita consumption reached an all-time high of ¥28,277. Meanwhile, retail spending in 2025 is projected to grow by 3.5%. This data confirms that the Chinese retail market is poised for expansion, potentially making BABA an attractive investment. However, it is important to note that a trade war with the United States could jeopardize economic growth, reduce consumer spending, and pose a risk to China's retail sector.
Opportunities: Alibaba’s AI
Alibaba continues to drive innovation in the rapidly growing artificial intelligence industry. Two weeks ago, the company unveiled its in-house AI platform, Qwen 3.0 Max. In my opinion, the American media has understated the significance of Qwen, as tests have shown it can outperform both ChatGPT and DeepSeek. This development represents a promising future growth opportunity for BABA. The company’s AI capabilities are so advanced that Apple plans to integrate Alibaba’s technology into its products. Through AI advancements and applications, BABA is establishing a future revenue stream that could drive long-term growth.
Qwen 3.0 Features
Threats:
A growing trend among Gen Z is the use of social media platforms for retail. From 2021 to 2025, social media’s share of China’s retail sales has increased from 14% to 17%. This shift poses a potential threat to BABA’s sales, as the company does not own any social media platforms. However, the intersection of retail and social media is a two-way street—just as social media threatens traditional retailers, retailers are also expanding into the social media landscape. Case in point, BABA has integrated Taobao and AliExpress into Chinese social media platforms like WeChat and TikTok. If social media-driven retail continues to grow, BABA may face some sales displacement, but its subsidiaries, such as AliExpress and Taobao, will continue generating revenue. This demonstrates that, regardless of shifting consumer trends, BABA has strategically mitigated risk and positioned itself to benefit from the rise of social media retailing.
Management:
One of BABA’s core strengths is its management team, led by Eddie Wu. Having been with the company since its inception, Wu is among the most qualified leaders to drive its growth. He understands that retail trends are constantly evolving and, as a result, plans to promote employees born after 1985 over the next four years. A younger management team is essential for BABA’s continued expansion, as the retail industry is ever-changing, and younger generations are more attuned to shifting consumer trends. In addition to the next generation coming into the company, BABA is still retaining core founders who have essential knowledge. Joe Tsai is one of the co-founders of BABA and is the current CFO. Tsai is globally oriented, this provides opportunity for BABA, to expand into foreign markets.
Joe Tsai
Fundamentals:
When comparing BABA to its competitors, it is evident that its fundamental value is superior. BABA has a price-to-earnings (P/E) ratio of 25.80, significantly lower than Amazon’s 41.34. Additionally, BABA boasts a net profit margin of 8.48%, outperforming Mercado Libre’s 7.60%, though slightly trailing Amazon’s 10.65%. Furthermore, BABA maintains a lower debt-to-equity ratio at 0.179, compared to Amazon’s 0.29 and Mercado Libre’s 1.58. With less debt than its peers, BABA avoids the higher borrowing expenses that burden Mercado Libre and Amazon, strengthening its financial position.
Conclusion:
When compared with its peers, BABA is performing well on several major metrics. In addition the macroeconomic factors of heightened Chinese consumer spending and projected increases in consumer spending will allow for BABA to grow. Additionally the company’s investment in artificial intelligence is outcompeting competitors and is planned to be incorporated into apple’s products. Finally after performing a fundamental analysis via a discounted cash flow, I recommend buying BABA, with an upper valuation of $500.