Eyes are on Alibaba ahead of its upcoming earnings report, as the stock has already surged 34% year-to-date

Alibaba Group Holding Ltd. (NYSE: BABA) is set to announce its earnings tomorrow, drawing significant attention from investors and traders. As of February 11, 2025, the stock is trading at around $114.18. The resistance sits between $118-$120, traders will be closely monitoring to see whether the price manages to edge above this price level following the earnings report.

Valuation Metrics

Alibaba's current Price-to-Earnings (P/E) ratio stands at 13.7, which is below the industry average, indicating a potentially undervalued stock. The forward P/E ratio is even more attractive at 11.5, suggesting expectations of earnings growth.

The company's Price-to-Sales (P/S) ratio is 1.8, and its Price-to-Book (P/B) ratio is 1.59, both of which are considered reasonable within the industry.

Fundamental Analysis

In the fiscal year ending March 31, 2024, Alibaba reported a 5% increase in revenue, totaling 236.5 billion yuan ($32.72 billion). However, this figure fell short of analysts' expectations of 240.17 billion yuan, primarily due to a slowdown in the Chinese economy and intensified competition.

Despite the revenue miss, net income saw a substantial rise of 58% to 43.9 billion yuan, driven by strong performance in equity investments.

The company's cloud computing division experienced a 7% growth, while the international e-commerce segment reported a 29% increase in revenue, highlighting Alibaba's expanding global footprint.

Investment Considerations

Analysts have set a one-year average price target of $121.10 for Alibaba, with estimates ranging from a low of $85.85 to a high of $152.25.

The company's strategic investments in artificial intelligence (AI) and cloud services are noteworthy. Alibaba Cloud's latest AI model, Qwen2.5-Max, exemplifies its commitment to technological advancement, which could drive future growth.

However, investors should remain cautious due to external factors such as ongoing U.S.-China trade tensions and potential tariff implications, which could impact Alibaba's operations and profitability.

Conclusion

Alibaba presents a compelling investment opportunity, given its reasonable valuation metrics and strong performance in key growth areas like cloud computing and international e-commerce. Nevertheless, potential investors should carefully consider external economic factors and market competition when making investment decisions.

(Sources: thetimes.co.uk, barrons.com, chartmill.com, ChatGPT)