Alibaba (BABA) AI Stock Analysis

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Alibaba

(NYSE:BABA)

83Outperform

Alibaba's strong financial performance and technical momentum underpin its solid market position. The positive outlook from the earnings call, driven by AI and e-commerce growth, further enhances its prospects. Valuation appears fair, considering its strategic investments and potential for long-term growth.

Positive Factors

AI and Cloud Growth

Alibaba stands out due to its competitive advantages in cloud infrastructure and versatile AI applications, making it a leading contender in the global open-source AI community.

Earnings and Financial Performance

Cloud and AI are a major bright spot with accelerated revenue growth and improved margins.

Valuation and Growth Potential

The stock is trading at a reasonable valuation compared to global hyperscalers, indicating potential for growth.

Negative Factors

Capital Expenditure Concerns

BABA expects to accelerate capex investments in AI for the next three years, which would exceed the cumulative total of the last 10 years.

Investment Impact on Margins

Higher depreciation is projected to reduce the EBITA margin for Alibaba from the previous estimates.

Macroeconomic and Market Challenges

Concerns exist about macro uncertainty and the capability of defending their ecommerce market shares, along with margin uncertainty due to investment in core businesses and substantial capex acceleration.

Alibaba (BABA) vs. S&P 500 (SPY)

Market Cap

$303.80B

Dividend Yield0.84%

Average Volume (3M)26.61M

Price to Earnings (P/E)16.4

Beta (1Y)0.85

Revenue Growth4.28%

EPS Growth28.42%

CountryUS

Employees194,320

SectorConsumer Cyclical

Sector Strength63

IndustrySpecialty Retail

Share Statistics

EPS (TTM)7.11

Shares Outstanding2,389,732,700

10 Day Avg. Volume21,062,140

30 Day Avg. Volume26,612,154

Financial Highlights & Ratios

PEG Ratio0.58

Price to Book (P/B)N/A

Price to Sales (P/S)2.48

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$167.48

Price Target Upside43.71% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering16

Alibaba Business Overview & Revenue Model

Company DescriptionAlibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others. It operates Taobao and Tmall, which are digital retail platforms; Alimama, a proprietary monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, Trendyol, and Daraz that are e-commerce platforms; Freshippo, a retail platform for groceries and fresh goods; and Tmall Global, an import e-commerce platform. The company also operates Cainiao Network logistic services platform; Ele.me, an on-demand delivery and local services platform; Koubei, a restaurant and local services guide platform; and Fliggy, an online travel platform. In addition, it offers pay-for-performance, in-feed, and display marketing services; and Taobao Ad Network and Exchange, a real-time online bidding marketing exchange. Further, the company provides elastic computing, storage, network, security, database, big data, and IoT services; and hardware, software license, software installation, and application development and maintenance services. Additionally, it operates Youku, an online video platform; Quark, a platform for information search, storage, and consumption; Alibaba Pictures and other content platforms that provide online videos, films, live events, news feeds, literature, music, and others; Amap, a mobile digital map, navigation, and real-time traffic information app; DingTalk, a business efficiency mobile app; Tmall Genie smart speaker; and Qwen, an artificial intelligence chatbot. The company was incorporated in 1999 and is based in Hangzhou, the People's Republic of China.

How the Company Makes MoneyAlibaba generates revenue through multiple streams, primarily from its core commerce segment, which includes retail marketplaces like Taobao and Tmall, as well as international commerce platforms like AliExpress and Lazada. The company earns money through commission fees on transactions, advertising services, and membership fees for premium services. Additionally, Alibaba Cloud contributes to revenue through cloud computing services, offering infrastructure and data management solutions to businesses. Digital media and entertainment, including platforms like Youku and Alibaba Pictures, also contribute through subscription and advertising revenue. Furthermore, Alibaba benefits from strategic partnerships and investments, such as its stake in financial services company Ant Group, which provides additional financial and technological synergies.

Alibaba Financial Statement Overview

Summary

Alibaba shows strong financial health with robust revenue and profit growth. The company maintains a solid balance sheet with low leverage and strong equity, while generating substantial cash flows. Despite a slight decline in free cash flow due to strategic investments, the company is well positioned within the retail industry.

Income Statement

Very Positive

Alibaba exhibits a strong financial performance with robust revenue growth of 13.0% from 2023 to 2024 TTM. The gross profit margin stands at 38.4%, indicating efficient cost management. The net profit margin is impressive at 12.3%, reflecting strong profitability. Additionally, the EBIT margin of 13.0% and EBITDA margin of 16.3% highlight efficient operational performance.

Balance Sheet

Very Positive

Alibaba maintains a solid financial position with a low debt-to-equity ratio of 0.23, indicating prudent leverage management. The return on equity is strong at 12.1%, showcasing effective utilization of shareholders' equity. The equity ratio is healthy at 54.0%, demonstrating a strong asset base funded by equity.

Cash Flow

Positive

The company shows a strong cash flow position with a free cash flow growth rate of -10.3% due to strategic investments. The operating cash flow to net income ratio is 1.30, indicating robust cash generation from operations. The free cash flow to net income ratio of 1.11 suggests that operations are efficiently converting profits to cash.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
981.77B	941.17B	868.69B	853.06B	717.29B	509.71B
	Gross Profit
377.14B	354.85B	318.99B	313.61B	296.08B	227.34B
	EBIT
127.20B	113.35B	100.35B	105.30B	170.05B	172.40B
	EBITDA
159.83B	164.01B	153.95B	144.56B	157.50B	185.79B
	Net Income Common Stockholders
120.92B	80.01B	72.78B	62.25B	150.58B	149.43B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
33.31B	571.03B	524.47B	455.08B	483.44B	363.21B
	Total Assets
63.79B	1.76T	1.75T	1.70T	1.69T	1.31T
	Total Debt
33.10B	205.61B	161.35B	141.34B	149.15B	125.43B
	Net Debt
2.71B	-42.51B	-31.73B	-48.55B	-172.11B	-205.07B
	Total Liabilities
52.83B	652.23B	630.12B	613.36B	606.58B	433.33B
	Stockholders Equity
10.42B	986.54B	989.66B	948.48B	937.47B	755.40B
Cash Flow		Free Cash Flow
134.28B	149.66B	165.40B	89.44B	188.60B	135.22B
	Operating Cash Flow
157.53B	182.59B	199.75B	142.76B	231.79B	180.61B
	Investing Cash Flow
-129.30B	-21.82B	-135.51B	-198.59B	-244.19B	-108.07B
	Financing Cash Flow
-126.13B	-108.24B	-65.62B	-64.45B	30.08B	70.85B

Alibaba Technical Analysis

Technical Analysis Sentiment

Negative

Last Price116.54

Price Trends

50DMA

125.04

Negative

100DMA

105.66

Positive

200DMA

96.49

Positive

Market Momentum

MACD

2.14

Positive

RSI

50.58

Neutral

STOCH

25.21

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For BABA, the sentiment is Negative. The current price of 116.54 is below the 20-day moving average (MA) of 135.09, below the 50-day MA of 125.04, and above the 200-day MA of 96.49, indicating a neutral trend. The MACD of 2.14 indicates Positive momentum. The RSI at 50.58 is Neutral, neither overbought nor oversold. The STOCH value of 25.21 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for BABA.

Alibaba Risk Analysis

Alibaba disclosed 70 risk factors in its most recent earnings report. Alibaba reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Alibaba Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BABA	83 Outperform	$303.80B	16.39	11.97%	0.84%	4.28%	28.42%
JD	78 Outperform	$62.78B	9.85	17.55%	2.01%	5.20%	77.60%
PDD	78 Outperform	$144.72B	9.87	45.06%	―	57.51%	82.28%
SE	78 Outperform	$61.24B	142.71	5.93%	―	28.46%	185.04%
AMZN	73 Outperform	$1.81T	30.97	24.29%	―	10.99%	91.61%
CPNG	59 Neutral	$36.22B	241.98	3.76%	―	24.14%	-88.77%
Sector *	59 Neutral	$11.20B	10.09	-1.41%	3.96%	1.31%	-16.95%

* Consumer Cyclical Sector Average

Performance Comparison

BABA

Alibaba

116.54

46.34

66.01%

AMZN

Amazon

171.00

-14.19

-7.66%

36.81

10.87

41.90%

Sea

106.63

50.65

90.48%

PDD

PDD Holdings

104.21

-13.41

-11.40%

CPNG

Coupang

20.06

1.63

8.84%

Alibaba Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -7.35% | Next Earnings Date: May 14, 2025

Earnings Call Sentiment Positive

The earnings call reflects strong growth in Alibaba's core businesses, including a significant upswing in cloud and AI product revenue. Strategic divestments have streamlined operations and strengthened the financial position. However, challenges such as decreased free cash flow and losses in certain segments like Cainiao and AIDC remain. Overall, the highlights significantly outweigh the lowlights, indicating a positive outlook.

Highlights

Strong Revenue and Growth Metrics

Overall revenue, excluding Alibaba consolidated subsidiaries, grew 11% year-over-year. AI-related product revenue maintained triple-digit year-over-year growth for the sixth consecutive quarter.

Cloud Business Growth

Cloud business revenue growth accelerated to 13%. AI momentum remains robust with AI-related product revenue sustaining triple-digit growth.

E-commerce Success

Taobao and Tmall businesses saw a significant upswing in CMR growth to 9% year-over-year. 88 VIP members maintained double-digit growth, reaching 49 million by the end of the quarter.

International E-commerce Business Growth

The international e-commerce business maintained strong growth, with AIDC expecting its first quarter of profitability in the next fiscal year.

Successful Asset Divestment

Agreements to dispose of interests in Senna for up to $1.6 billion and in-time for $1 billion were completed, reflecting strategic shifts.

Strong Financial Position

Operating cash flow increased 10% to RMB 70.9 billion. Alibaba maintains a strong net cash position of RMB 378.5 billion.

Lowlights

Decreased Free Cash Flow

Free cash flow decreased 31% to RMB 39 billion, mainly due to increased expenditure related to investments in cloud infrastructure.

Cainiao Revenue Decline

Revenue from Cainiao decreased by 1% and its adjusted EBITDA decreased by 76% due to ongoing restructuring.

AIDC Adjusted EBITDA Loss

AIDC's adjusted EBITDA was a loss of RMB 5 billion compared to a loss of RMB 3.1 billion in the same quarter of last year.

Company Guidance

During Alibaba Group's December Quarter 2024 earnings call, the company provided detailed guidance on its strategic focus and anticipated financial growth. Alibaba emphasized its commitment to its AI-driven strategy, noting a 13% revenue growth in its Cloud Intelligence Group, with AI-related product revenue maintaining triple-digit year-over-year growth for the sixth consecutive quarter. The company highlighted the launch of Qwen 2.5 Max, a flagship AI foundation model, which has seen widespread adoption with over 90,000 Qwen-based derivative models developed globally. Additionally, Alibaba's e-commerce platforms, Taobao and Tmall, experienced a 9% year-over-year growth in customer management revenue (CMR), supported by a growing base of 49 million 88 VIP members. The company also announced plans to substantially increase its investment in AI and cloud infrastructure over the next three years, surpassing the cumulative investment made over the past decade. Financially, Alibaba reported a consolidated revenue of RMB 280.2 billion, an 8% increase, and a 4% rise in consolidated adjusted EBITDA to RMB 54.9 billion, despite a 31% decrease in free cash flow due to increased cloud infrastructure investment. Looking ahead, Alibaba expressed confidence in its focused strategy on e-commerce and AI plus cloud, aiming for sustained growth and increased shareholder returns through strategic initiatives and asset divestments.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.