Chinese stocks in general and Alibaba (BABA -2.99%) in particular got off to scorching starts this year. Shares of the country's e-commerce pioneer were trading 75% higher in 2025 at its mid-March high. The general market has rallied in recent months, but Alibaba remains 19% below that wintry peak.
There are some good reasons for the pullback, and I'll tackle this shortly. It doesn't mean that it's not a good time to buy Alibaba like there's no tomorrow. Let's dive into a few of the reasons why I'm a shareholder of Alibaba, and why I think you might want to join me if you aren't there already.
1. Alibaba shares are cheap
Alibaba is coming off a rare earnings miss in its latest quarter, and analysts have been paring back their profit targets. This isn't a good look, but it doesn't mean that it isn't a compelling value right now.
Alibaba is trading for 16 times trailing adjusted earnings. Stack that up against stateside e-tail leaders, and the bargain is clear. Look out to the new fiscal year that started in April, and that multiple drops to less than 14. Why stop there? Alibaba is fetching a forward adjusted earnings multiple of just 11.5 if we look out to the next fiscal year.
These low P/E ratios are actually inflated. Alibaba has nearly $60 billion in cash and short-term investments, double its long-term debt. Alibaba's strong net-cash position translates into an enterprise value that is lower than its market cap. Next year's profit multiple drops below 11 if you're rolling with its enterprise value as the numerator.
Image source: Getty Images.
2. Growth deserves a market premium
The surprising thing about Alibaba's attractive earnings-based valuation is how it overcomes losses outside of its flagship e-commerce platforms. Alibaba isn't afraid to place bets that don't pay off in the near term. It watches over some unprofitable businesses including streaming content, international operations, a growing presence in the cutthroat realm of third-party food delivery apps, and artificial intelligence (AI), of course.
Alibaba doesn't keep all of its eggs in the same basket. The benefit of its perpetual evolution is that its top line keeps growing year after year. Business has slowed, but the last three fiscal years of single-digit revenue gains followed 10 consecutive years of double-digit top-line gains. Analysts see revenue growth accelerating in fiscal 2026, picking up the pace yet again next year.
3. Alibaba thinks its stock is cheap
Some investors aren't fans of share buybacks, but that's usually when it's the handiwork of a slumping company that's fresh out of growth ideas. Alibaba doesn't fit that fading profile. It's just flush with more than enough cash to fund its long-term wagers in emerging businesses. Beyond its modest dividend, Alibaba has purchased shares every single quarter for at least the last two years.
The buybacks haven't held the shares back. Alibaba stock is up 53% over the past year. Reducing its outstanding shares by 9% over the past two years has its benefits. It improves earnings on a per-share basis. It gives a shareholder a slightly larger chunk of the company.
Time is on its side. August finds the tariff war heating up, but 85% of Alibaba's business takes place within China itself. It's one of the more sheltered investments from the volatility behind the trade tussle. Sure, its U.S.-selling AliExpress e-commerce platform will take a hit. This is still a juggernaut on its home turf. It has Taobao, Tmall, and a rapidly growing cloud intelligence business. The stock is on a tear, even with many of its more brazen bets still waiting for their moment to shine. It's easy to see why Alibaba keeps eating its own cooking with these share repurchases. You might want to consider following suit.
