Key Takeaways
- Alibaba shares have declined more than 7% in 2025, currently valued at 16x forward earnings — significantly below its historical 10-year average of 19x
- The company reports fiscal Q3 results on March 19, with analysts projecting EPS of $1.67 (down 43% YoY) and revenue of $42.1 billion
- Morgan Stanley elevated BABA to its premier China tech investment, displacing Tencent from that position
- Mizuho maintains a $195 price target, while sum-of-the-parts analysis indicates potential value of $213 per share
- Morgan Stanley projects China’s AI chip market will reach $67 billion by 2030, with domestic production achieving 76% self-reliance
Alibaba’s 2025 performance has been challenging so far. Shares have tumbled more than 7% since January, pressured by mounting concerns about artificial intelligence competition, questions surrounding its strategic direction, and macroeconomic headwinds affecting Chinese consumer demand.
Alibaba Group Holding Limited, BABA
However, an increasing number of Wall Street professionals believe the market has overreacted to these concerns.
The e-commerce giant’s shares currently command a forward price-to-earnings multiple of 16x. This valuation sits below its decade-long average of 19x and represents a significant discount compared to Amazon‘s approximately 26.5x multiple. According to Barron’s analysis, technical indicators suggest the stock has entered oversold territory.
Investors will get fresh insights when Alibaba unveils its fiscal third-quarter results on March 19. Wall Street consensus anticipates earnings per share of $1.67, representing a 43% year-over-year decline, while revenue is projected to climb 9% to $42.1 billion.
While the earnings contraction appears substantial, the revenue trajectory suggests continued business momentum. The upcoming earnings call will provide management an opportunity to directly address market uncertainties.
A significant area of investor focus centers on Alibaba’s Qwen AI division. Recent media reports have surfaced regarding leadership transitions and executive exits within the unit, sparking speculation about potential internal strategic disagreements regarding AI development.
Citigroup’s Alicia Yap acknowledged these reports in her analysis. However, she emphasized that Qwen experienced robust order activity during the Chinese Lunar New Year period, an important indicator of commercial traction.
The AI technology has been embedded throughout Alibaba’s primary consumer platforms — including Tmall, Taobao, Freshippo, and Alipay. This represents substantial distribution reach for the company’s AI capabilities.
Cloud Division Remains Underappreciated
Mizuho’s Wei Fang contends that Alibaba’s cloud computing business isn’t receiving appropriate recognition from investors. She characterizes the company’s operational fundamentals as “progressively stronger, fueled by AI-driven expansion.”
Fang designates Alibaba’s cloud infrastructure as China’s most advanced. The business unit directly competes with major global players including Amazon Web Services, Google Cloud, and Microsoft Azure.
Her formal price objective stands at $195 per share — representing 43% upside from current trading levels. When applying a sum-of-the-parts valuation methodology, Fang calculates potential fair value at $213 per share, with e-commerce and cloud operations accounting for the majority of that assessment.
Additionally, she estimates that Alibaba’s diversified business portfolio, combined with its cash holdings and investment portfolio, contribute approximately $25 per share in standalone value.
Morgan Stanley Elevates BABA to Top Position
Morgan Stanley took a more aggressive stance recently, promoting Alibaba to its highest-conviction investment recommendation within the China technology sector — displacing Tencent from that designation.
The investment bank emphasized Alibaba’s comprehensive positioning across the complete AI value chain: semiconductor development, cloud infrastructure, foundational AI models, and customer-facing applications.
Regarding AI semiconductors specifically, Morgan Stanley considers Alibaba’s proprietary chip designs among the industry’s elite. The firm ranks the company as China’s dominant cloud infrastructure provider and the world’s fourth-largest globally.
The bank also recognizes Alibaba’s open-source AI model initiatives, which have achieved substantial international adoption.
Looking forward, Morgan Stanley projects the addressable market for AI chips within China will expand to $67 billion by decade’s end. The firm anticipates domestic AI chip manufacturing capabilities will achieve 76% self-sufficiency by 2030.
Alibaba’s earnings release is scheduled for March 19.
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