Where Will Alibaba Stock Be in 1 Year?

Alibaba's stock has rallied nearly 50% over the past year, recovering from prior regulatory challenges, increased competition, and China's economic slowdown, though it remains 65% below its 2020 peak. This stabilization is attributed to robust growth in its overseas e-commerce and cloud businesses, cost efficiencies, and share buybacks, resulting in improved revenue and expanding operating margins. Analysts project continued revenue and EPS growth for fiscal years 2026-2027, and despite the recent gains, the stock trades at 11x forward adjusted earnings, suggesting potential undervaluation and significant upside if U.S.-China trade tensions abate.

Analysis

Alibaba's stock has demonstrated a significant recovery, rising nearly 50% over the past year, though it remains 65% below its October 2020 peak. This rebound is underpinned by a stabilization of business fundamentals following a period of intense regulatory, competitive, and macroeconomic pressure that saw revenue growth plummet from 19% in fiscal 2022 to just 2% in fiscal 2023. The company has since engineered a turnaround, evidenced by consistent mid-single-digit year-over-year revenue growth in recent quarters, such as 7% in Q4 2025. This stabilization is primarily driven by robust performance in its overseas e-commerce platforms and a recovery in its cloud segment, which is benefiting from AI demand. Critically, operational efficiency has improved, with operating margins expanding to a 12-15% range from 7% in Q4 2024, and adjusted EPS growth turning positive, reaching 23% in the latest reported quarter after a period of contraction. Despite these improvements, the stock trades at a compressed valuation of just 11 times forward adjusted earnings, with analysts projecting 7-8% revenue and 8-14% adjusted EPS growth for fiscal years 2026-2027. This suggests the market is pricing in significant risk associated with U.S.-China trade tensions, which the article identifies as the key overhang preventing a valuation re-rating.

Key Decisions for Investors

• Investors may view the stock as undervalued, given its low 11x forward P/E multiple in the context of stabilizing revenue, expanding operating margins, and a return to positive adjusted EPS growth.
• The investment thesis is heavily contingent on geopolitical factors, thus positions should be managed with careful consideration of the risks from escalating U.S.-China trade tensions, which are currently suppressing the valuation.
• Potential upside is directly linked to a valuation re-rating, so investors should monitor for any easing of geopolitical pressures that could serve as a catalyst for the stock to trade closer to a more generous multiple, such as the 15x forward earnings suggested in the analysis.