Chicago, IL – February 21, 2025 – Today, Zacks Investment Ideas feature highlights Alibaba BABA, Futu Holdings FUTU, Baidu BIDU, Krane CSI China Internet ETF KWEB and JD.com JD.
Alibaba: Back on Track and Poised for Growth
In 2020, Zacks Ranked #3 (Hold) stock Alibaba was at the top of its game. Dubbed the “Amazon of China,” BABA had a stranglehold on a massive and growing Chinese e-commerce business. BABA shares had rallied from the IPO price of ~$100 in 2014 to over $300 per share at its peak in 2020. Not only did BABA enjoy the benefit of a massive Chinese market, but the government kept foreign competitors from entering the market, and the Chinese economy looked poised to take over the U.S. economy.
However, as is often the case on Wall Street, BABA’s fortunes turned when things looked the best. The Covid-19 pandemic decimated the Chinese economy, leading to mass unemployment among youth. Worse yet, in November 2020, BABA founder and former CEO Jack MA delivered a speech critical of the Chinese government.
Ma, who is the wealthiest man in China, was summoned for questioning by the government, and his ambition to bring BABA affiliate Ant Group (owner of the world’s largest mobile payment platform, Alipay) was brought to a screeching halt when the company’s stock market listing was suspended. Ma would disappear from public view for months as BABA shares plunged from ~$300 to $58 in December 2022.
BABA Crushes Wall Street Expectations
Until early 2025, BABA shares were stuck in a frustrating trading range as the economy continued to sputter. However, over the past twelve months, the company appears to have finally turned the corner as shares gained more than 80%. Thursday morning, BABA smashed Wall Street expectations, confirming investors’ bullish bias. Revenue of 280.15B Yuan beat Wall Street expectations of 277.37B.
Why BABA Can Double from Here
While BABA has appreciated nicely for bulls over the past few months, the move is likely just getting started. Below are five reasons to be long BABA:
1. Multi-Year Breakout
An old Wall Street adage explains, “The longer the base, the higher in space.” That’s good news for BABA bulls. BABA is breaking out of a 3-year base structure following its earnings beat.
2. BABA Is Back on the Government’s Good Side
As BABA investors learned in 2020, growing a business is impossible without being on the controlling and powerful government’s good graces. Earlier this month, Jack Ma was seen shaking hands with President Xi Jinping, signaling to investors that the relationship between BABA and the Chinese government had been rehabilitated.
3. BABA Is Cheap
Despite the recent meteoric price rise, BABA’s price-to-earnings ratio is near all-time lows as growth begins to pick up – a bullish combination.
4. New Revenue Sources
In the earnings conference call, BABA CEO Eddie Wu explained,“Our cloud revenue growth reignited to double digits at 13%, with AI-related product revenue achieving triple-digit growth for the sixth consecutive quarter. Looking ahead, revenue growth at Cloud Intelligence Group driven by AI will continue to accelerate.”
5. China Bull Market & Smart Money Buyers
Market history suggests that roughly 75% of a stock’s move is correlated to the general market’s direction. With the government stimulating the Chinese economy and the rapid success of the DeepSeek AI large language model, the Chinese stock market and the iShares China Large Cap ETF (FXI) are in bull mode. In addition, David Tepper, one of Wall Street’s sharpest minds, has roughly a 20% allocation to Chinese stocks like Baidu, the Krane CSI China Internet ETF and JD.com. Meanwhile, market breadth is robust, with lesser-known Chinese stocks like Futu Holdings ripping higher.
In conclusion, a confluence of factors, including a multi-year breakout, renewed government favor, a low P/E ratio, burgeoning new revenue streams, and a broader Chinese market resurgence fueled by smart money – paints a compelling picture for Alibaba’s future.
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