Alibaba: Thawing Geopolitical Sentiments May Trigger Rich Recovery Prospects – Maintain Buy

Summary:

• BABA is likely to sustain its upward recovery ahead, thanks to the seemingly thawing relationship between the US and China, pending further policy clarity in 2025.
• Its cloud segment has also generated a profitable growth trend, significantly aided by the impressive in-house AI capability and Qwen2.5 Coder at 72B parameters matching those from OpenAI and Anthropic.
• Despite the sluggish domestic e-commerce growth, BABA’s international e-commerce segment is already reporting robust double digit growths, albeit with ongoing cash burn.
• Despite the growth headwind, it continues to generate rich Free Cash Flows as the management intensifies their AI-related capex and shareholder returns.
• Combined with the overly discounted valuations compared to pre-crackdown levels, we believe that BABA is likely to offer rich double digit capital appreciation over the next few years.

BABA Is Inherently Undervalued – Offering Opportunistic Investors With A Rich Capital Appreciation Prospect

We previously covered Alibaba Group Holding Limited (NYSE:BABA) in August 2024, discussing its promising performance metrics in the cloud and

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