Where Will Alibaba Stock Be in 1 Year?

Alibaba (BABA) shares have gained 46% over the past year, driven by its highly profitable e-commerce core, which generated $27 billion in adjusted EBITA in FY25, effectively funding strategic ventures in cloud, AI, and food delivery. Despite recent single-digit revenue growth and trade headwinds, the company's robust cash flow, ongoing share buybacks, and attractive forward P/E multiples (14x current, <11x next fiscal year) position it as a compelling, potentially undervalued investment. Strategic divestitures, such as its autonomous driving unit, and improving profitability in other segments, like Youku video streaming, further enhance its financial flexibility and long-term outlook.

Analysis

Alibaba's investment thesis is anchored by the formidable profitability of its core Chinese e-commerce platforms, Taobao and Tmall, which generated $27 billion in adjusted EBITA in fiscal 2025, accounting for 113% of the company's total consolidated adjusted EBITA. This segment's 44% adjusted EBITA margin produces substantial cash flow, effectively subsidizing strategic investments in nascent but growing areas like artificial intelligence and a $7 billion promotional push into food delivery. While top-line revenue growth has moderated to single digits for three consecutive years, the company's financial strength mitigates concerns over external pressures such as U.S. tariffs, as the impacted international e-commerce business constitutes only 13% of revenue and is already a loss-making operation. The company is demonstrating progress in its portfolio diversification, with its cloud business being both fast-growing and profitable, and its Youku video platform recently achieving profitability. Supported by a cash-rich balance sheet, management is actively returning value to shareholders through consistent share buybacks over the past eight quarters and a 0.9% dividend yield. Despite a 46% share price increase over the past year, the stock's valuation remains modest, trading at 14 times this fiscal year's earnings and less than 11 times next year's profit target.

Key Decisions for Investors

• Investors should consider the current valuation, with a forward P/E of less than 11 for the next fiscal year, as a potentially attractive entry point given the immense and stable cash generation from the core e-commerce business.
• It is prudent to monitor the upcoming Q1 earnings report for updates on the performance of strategic growth initiatives and their impact on near-term margins, particularly the investment in the food delivery market.
• The combination of sustained share buybacks, a modest dividend, and strategic actions like the spin-off of the autonomous-driving unit are key catalysts that could unlock further shareholder value, independent of top-line growth.