Alibaba’s Turnaround Story: Investors Overlook Bullish Realities

HANGZHOU, China — Alibaba Group, China’s e-commerce giant, is navigating a challenging economic landscape as its stock continues to underperform despite signs of a potential turnaround. The company, which operates popular platforms like Taobao and Tmall, reported a 5% year-over-year revenue increase to nearly $34 billion in the latest quarter, yet its shares remain 26% below their October peak and more than 70% under their 2020 high.

China’s economy, still recovering from the lingering effects of the COVID-19 pandemic and a real estate crisis, has weighed heavily on Alibaba’s performance. However, recent data suggests a glimmer of hope. Retail sales in China rose 3.7% year over year last month, exceeding expectations and marking 24 consecutive months of growth. Industrial production also improved, growing 6.2% in December, signaling that economic stimulus measures may be taking effect.

“Investors are focusing too much on the negatives and overlooking the bullish realities,” said an industry analyst. “Alibaba’s core businesses are showing resilience, and the company is making strategic moves to adapt to the changing market.”

In late 2023, Alibaba underwent significant leadership changes, with co-founder Trudy Dai replaced as head of its e-commerce arm by CEO Eddie Wu. The company also reversed plans to spin off its Cainiao logistics unit and retained its cloud-computing operation, signaling a shift toward consolidation and long-term growth. These decisions have allowed Alibaba to venture into artificial intelligence (AI), a sector projected to grow at an annualized rate of over 21% through 2034.

Despite these efforts, Alibaba faces stiff competition from rivals like PDD, owner of Temu and Pinduoduo, and JD.com. Revenue from Taobao and Tmall grew just 1% year over year in the latest quarter, reflecting the challenges of a value-conscious consumer base. However, Alibaba’s international e-commerce platforms, AliExpress and Trendyol, have emerged as bright spots, with revenue surging 29% to $4.5 billion.

Analysts remain optimistic about Alibaba’s future. The majority rate the stock as a strong buy, with a consensus price target of $120 per share, representing a 40% upside from its current price. “The market is underestimating Alibaba’s potential,” said one analyst. “As China’s economy stabilizes and consumer spending rebounds, the company is well-positioned to capitalize on its strengths.”

While challenges persist, including potential U.S. tariffs and a sluggish real estate market, Alibaba’s strategic adjustments and focus on innovation could pave the way for a recovery. Investors, however, will need to look beyond the headlines to see the full picture.