Alibaba Group Holding Limited (NYSE:BABA) has recently seen its stock price soar over 50%, primarily due to investors' optimistic expectations regarding AI (Artificial Intelligence) development. Although Alibaba's valuation has remained low due to sluggish growth in its core retail business and geopolitical risks in China, this has not hindered a strong rebound in its stock price. The market generally believes that Alibaba is undergoing a strategic transformation from retail dominance to AI innovation, with its capital expenditures growing at an accelerating pace.
In its recent financial report, Alibaba's core retail business showed signs of stability, particularly with a 2.5% year-over-year increase in revenue from its customer management operations in China. However, other segments, such as direct sales, saw a 5% decline in revenue due to the overall economic slowdown. Nevertheless, management remains optimistic, believing that government stimulus measures will help restore growth in the business.
The robust growth of Alibaba Cloud's intelligent business has become a key driver of revenue rebound, with the cloud intelligence segment's revenue increasing by 7.1% year-over-year. Management also noted that revenue from AI-related products has achieved triple-digit growth for five consecutive quarters, indicating that Alibaba's investments in AI are yielding significant results. Additionally, a potential partnership with Apple has provided a positive boost to its stock price.
Despite the significant rise in stock price over the past month, Alibaba's price-to-earnings ratio remains attractive. Currently, its forward P/E ratio under non-GAAP is 13.9 times, which is 20% lower than the industry average. Analysts point out that Alibaba's valuation still carries a premium compared to competitors like Baidu and JD.com, reflecting the market's optimistic expectations for its AI growth.
However, despite the optimistic outlook, Alibaba's stock price may experience volatility and technical consolidation in the short term, especially as it approaches its 52-week high. Investors should pay attention to changes in market sentiment, particularly the impact of AI-related news on stock prices. Overall, Alibaba is in a critical transformation period, and with the continued growth of its cloud business, it still holds significant upside potential for the future.
