Alibaba stock down 70% from highs, but AI push showing results, potential for future growth

From Nasdaq: 2024-09-03 00:17:11

Alibaba stock has risen 5% this year but remains down over 70% from 2021 highs. Q1 FY’25 earnings were $2.26/share, down 5%, while revenues rose 4% to $33.50 billion. Alibaba’s Cloud Intelligence Group saw a 6% YoY growth to $3.72 billion. Operating profits for the group increased 155% to $322 million, showing potential for future profitability.

Alibaba’s cloud business experienced a slowdown due to decreased demand post-COVID lockdowns. However, AI offerings saw triple-digit growth rates in Q1 FY’25, with AI product revenue increasing. The company’s focus on developing open-source AI models, like its Qwen large language model, could drive further adoption of its cloud services and AI products, boosting revenues.

BABA stock has underperformed, suffering a sharp decline of nearly 70% since early 2021. The Trefis High Quality Portfolio, composed of 30 stocks, outperformed the S&P 500 each year over the same period. Alibaba’s current valuation is attractive at about 10x forward earnings, with estimated upside potential. The company has been repurchasing shares, indicating confidence in its future growth.

Alibaba’s stock trades at a lower multiple compared to Amazon, with a potential 30% upside from its current price of $81 per share. The company’s strong focus on AI and cloud services could drive future growth and profitability. Comparing returns shows the Trefis Reinforced Value Portfolio outperforming both BABA stock and the S&P 500 over time, highlighting the potential for long-term investment success.



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