Alibaba (NYSE:BABA) is a cornerstone of China’s tech sector, but its price has been fluctuating significantly in recent months. The stock surged over 75% earlier this year but started plateauing in February, and recent tariff fears have sent it back down again. Many see it as a legacy e-commerce company, but that’s no longer the case in this environment, and “Smart Money” investors like Michael Burry and David Tepper are knee-deep in this company. Now that BABA stock is below $100, should you buy? Let’s take a look.
Alibaba has been surprisingly resilient despite the broader market downturn. It’s no longer just an e-commerce platform and has segments for cloud computing and logistics. It reported better-than-expected results for the quarter ending December 31, 2024 (Q3 Fiscal 2025).
For Q3 2025, Alibaba reported an EPS of $2.93. This beat analyst estimates of $2.66 by over 10%. This compares to an EPS of $2.67 in the same quarter the previous year.
Its Cloud Intelligence Group reported a 13% year-over-year revenue increase and AI-related cloud revenue grew by triple digits for the sixth consecutive quarter. I believe AI-related revenue could sustain the momentum if Qwen 3 is a success. Alibaba is expected to release that AI model this month.
Alibaba is relatively insulated from tariffs. It generates most of its revenue from China and the Asia-Pacific region. Alibaba generates a relatively small percentage of its total revenue from the United States. Most of its income is derived from its domestic Chinese e-commerce platforms, such as Taobao and Tmall, which accounted for 46% of its total revenue in 2023. International commerce retail constituted only 11% of its revenue.
Even if we consider that half of its international retail revenue comes from the U.S., tariffs are not going to have a severe impact here. Most of its prospects are also domestic. China’s cloud market is growing fast as the country is starting to dump massive amounts of money into AI post-DeepSeek. A lot of this could translate into revenue and profits for Alibaba.
On top of that, it has the margins to take a hit. Net margin is at 17.54% as of the most recent quarter. Those profits are maintaining a dividend yield of 2% at the current price and Alibaba is also doing massive share buybacks.
There’s plenty of cash (and profits, of course) to keep both dividends and buybacks going strong.
I believe it’s a good time to buy BABA stock, though more discounts could be ahead due to market panic. China is yet to retaliate to the 104% tariffs that went in at midnight. No one knows what the retaliation is going to look like, so I would wait for that to go through.
However, dollar-cost averaging at these levels is not a bad idea. Profits are expected to keep increasing significantly.
All the market has to do is hold up the premium for BABA to be a profitable long-term investment. And the “premium” here is just 9.6 times forward earnings.
At the same time, I think it wouldn’t be smart to go too heavy into BABA right now.
We’re in an environment where you can grab Super Micro Computer (NASDAQ:SMCI) at 9 times forward earnings and NVIDIA (NASDAQ:NVDA) at 21 times forward earnings. Your money should do much better in the coming years if you put it in NVDA or any other growth company going at a discount right now. Buying BABA is only worthwhile for exposure to the Chinese AI market.
Alibaba plans to invest $52.4 billion in cloud and AI infrastructure over the next three years and this could induce more revenue growth. Revenue growth is the missing part of the puzzle here, and AI + cloud could change this significantly. But again, it may not happen if the hype surrounding AI keeps deteriorating.
Currently, the consensus price target is at $150, which implies a 51.55% upside potential. The lowest price target here is right at $100, though I think BABA could decline to $75 if the trade war lingers on.
I rate BABA stock a buy, but only a buy if you have extra cash after buying hotter stocks like NVDA and TSM.
