Alibaba: Undervalued Amid Sanctions Noise, Still a Strong Buy $BABA
By Shayne Heffernan
Alibaba ($BABA) has been in the headlines lately, caught in a sanctions kerfuffle that’s rattled its stock price but hasn’t changed its fundamentals. With U.S. scrutiny over its AI partnership with Apple and broader trade tensions, the Chinese tech giant’s shares have taken a hit—down 3% on May 30, 2025, after news broke of potential backlash over AI features for iPhones in China. Yet, beneath the noise, Alibaba remains deeply undervalued, trading at a steep discount to its peers, with strong growth in e-commerce and cloud segments making it a solid buy for investors willing to look past short-term geopolitical jitters.
Alibaba’s stock price as of June 4, 2025, sits at $114.97, a far cry from its 52-week high of $148.43. That drop has been fueled by fears of U.S. sanctions and trade-related uncertainty, with posts on X reflecting investor unease over delisting risks and broader anti-Chinese sentiment. The Trump administration’s rhetoric, combined with a May 2025 scrutiny of Alibaba’s AI deal with Apple, has kept the stock under pressure. But these sanctions fears are overblown—Alibaba’s core business is in China, with limited direct exposure to U.S. tariffs, as noted by Bank of America analyst Joyce Ju. Most of its U.S. sales come through third countries, insulating it from the worst of the trade storm.
Look at the numbers, and Alibaba’s undervaluation becomes clear. It’s trading at a forward P/E ratio of 9.13, well below its industry average of 25.34, according to Zacks. Compare that to Amazon ($AMZN), a global peer, which trades at a P/E of 45—Alibaba’s at nearly half the industry average despite similar scale in e-commerce and cloud. Analysts agree: 16 Wall Street pros give $BABA a Strong Buy rating, with an average price target of $164.54, suggesting a 44.54% upside from current levels, per TipRanks. Even conservative estimates, like Simply Wall St.’s fair value of $114, show it’s trading at a discount to its intrinsic worth.
Alibaba’s fundamentals are rock-solid, even amidst sanctions noise. Q4 FY 2025 revenue grew 7% year-over-year to $38.38 billion, with EBITA up 36%, despite missing analyst expectations. The cloud segment, a key growth driver, has seen triple-digit AI-related revenue growth for seven consecutive quarters, fueled by models like Qwen-Max and QwQ-32B, which compete with Western AI providers at lower costs. Alibaba’s $53 billion investment in AI and cloud infrastructure over the next three years—more than its past decade combined—positions it to dominate this space. Meanwhile, its e-commerce platforms, Taobao and Tmall, remain dominant in China, with Taobao Instant Commerce hitting 40 million daily orders just a month after launch, as reported on X.
The sanctions kerfuffle has created a buying opportunity. Alibaba’s diversified revenue streams—e-commerce, cloud, digital media, and logistics—give it resilience. Its share buyback program, with $20.7 billion authorized through March 2027, signals confidence in its value, potentially boosting shareholder returns by reducing outstanding shares by 3% annually. Posts on X highlight the sentiment: some investors see $BABA as “dirt cheap” with strong cash flows and massive e-commerce and cloud presence, despite China-related fears.
Geopolitical risks are real—U.S.-China tensions could escalate, and regulatory crackdowns in China, like the $2.75 billion anti-monopoly fine in 2021, have left scars. But Alibaba’s weathered worse, and its growth trajectory remains intact. For investors, the sanctions noise is masking a fundamentally undervalued stock with a clear path to growth. $BABA is a strong buy—don’t let the headlines scare you off.
