Alibaba (BABA 1.36%), the largest e-commerce and cloud infrastructure company in China, has shed about 60% of its value since it closed at a record high of $307.84 on Oct. 27, 2020. The bulls retreated as the company faced fierce regulatory, competitive, and macroeconomic headwinds.
China's antitrust regulators slammed its e-commerce business with a record fine and shackled it with tighter restrictions in 2021. Those setbacks eroded its defenses against aggressive competitors like PDD and JD.com. As for the macro environment, the sluggish growth of China's economy after the pandemic curbed consumer spending and drove many companies to rein in their spending on the company's cloud-based services.
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Those challenges convinced many investors that Alibaba's high-growth days were over. However, since the beginning of 2025, its stock has rallied nearly 50%. Below, I'll review the main catalysts that fueled that rally and see if they'll drive the company's shares even higher through the end of the year.
The three catalysts that drove Alibaba's stock higher
Alibaba impressed the market again with the stabilization of its e-commerce business, the accelerating growth of its cloud business, and its bold buybacks.
NYSE: BABA
Key Data Points
The company has been offsetting the slower growth of its maturing Taobao and Tmall marketplaces in China with the robust growth of its overseas marketplaces. In fiscal 2025 (which ended in March), its Taobao and Tmall revenue rose just 3%. But its smaller International Digital Commerce Group (which includes Lazada in Southeast Asia, Trendyol in Turkey, Daraz in South Asia, and AliExpress for its cross-border purchases) saw revenue jump 29%.
Meanwhile, Alibaba's Cloud Intelligence revenue rose 11% as the explosive growth of the artificial intelligence (AI) market drove more companies to ramp up their spending on its cloud infrastructure services again. It also integrated Qwen -- its own family of large language models (LLMs) for new generative AI applications -- into its cloud infrastructure platform to attract more AI-oriented customers. The expansion of that ecosystem turned Alibaba from an aging e-commerce leader into an exciting cloud and AI play.
Alibaba's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) both rose 6% in fiscal 2025. With an enterprise value of 1.69 trillion yuan ($240 billion), the company's stock looks dirt cheap at 2x this year's sales and 8x its adjusted EBITDA.
That valuation is likely being compressed by the unresolved trade issues between the U.S. and China, which are curbing the market's appetite for Chinese equities. Yet the company bought back 5% of its shares for $11.9 billion in fiscal 2025 -- which implies it's still deeply undervalued. Therefore, a favorable trade deal between the U.S. and China could drive its valuations a lot higher.
From a growth play to a value play
From fiscal 2025 to fiscal 2028, analysts expect Alibaba's revenue and adjusted EBITDA to grow at a compound annual growth rate (CAGR) of 7% and 11%, respectively. That growth should be driven by the growth of its e-commerce and cloud businesses, the expansion of its generative AI ecosystem, and the increased usage of its logistics services for third-party customers.
Alibaba also recently proposed a spin-off of its Banma autonomous driving unit, which suggests it might revisit plans to spin off its cloud and logistics units in fresh initial public offerings (IPOs). A chilly market and other macro challenges forced it to scrap those plans, but spinning them off could boost the company's cash flow while unlocking more value for its shareholders.
Alibaba's high-growth days are probably over. The company should grow at a stable rate over the next few years as its core businesses expand and it finds fresh ways to boost its earnings, but it will likely be considered a value play instead of a growth one. Its stock could gradually head higher through the end of the year if the relationship between the U.S. and China warms up, but investors shouldn't expect it to revisit its all-time highs anytime soon.
