If you are sitting on the fence about Alibaba Group Holding, you are definitely not alone. Plenty of investors are weighing their options right now, especially with the company putting up such wild numbers. In just the last month, Alibaba’s stock price has soared an impressive 40.6%, and that’s after already jumping 102.4% year-to-date. It is easy to see why hands are hovering over the ‘buy’ button, but also why some might pause for a deeper look given the rollercoaster ride over the past five years, which actually still leaves the stock at a 37.2% loss across that longer stretch.
What’s pushing the stock higher? Part of it seems to be shifting sentiment about Alibaba’s growth prospects, especially as the company leans into cutting-edge technology. The recent news that Alibaba is integrating Nvidia’s AI development tools into its cloud platform has certainly caught market attention, fueling optimism about the company’s ability to compete in high-growth arenas.
So, is Alibaba undervalued, overvalued, or just right? By the numbers, Alibaba scores a 4 out of 6 on key valuation tests, which is a strong signal among its large-cap tech peers. This does not guarantee future performance, but it means the market may not be fully recognizing the company’s strategic moves, at least, not yet.
Up next, I will break down which valuation checks Alibaba passes and which it does not. And if you really want to get ahead, you will want to see the one approach smart investors have been turning to for a richer understanding of value. More on that at the end of this article.
Alibaba Group Holding delivered 62.8% returns over the last year. See how this stacks up to the rest of the Multiline Retail industry.
The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future free cash flows and then discounting them back to today’s value. This method is especially useful for large, cash-generating businesses like Alibaba Group Holding, which reports its financials in Chinese Yuan (CN¥).
Currently, Alibaba’s last twelve months Free Cash Flow stands at approximately CN¥83.1 billion. Analyst forecasts indicate this figure could rise significantly over the next decade, with projections for 2028 reaching around CN¥140.9 billion. Further long-term estimates, extrapolated by Simply Wall St, show continued growth each year.
Based on these forward cash flow projections and discounting them appropriately, the DCF model calculates an intrinsic fair value for Alibaba stock of CN¥173.01 per share. When compared to the current share price, this suggests the stock trades at a 0.6% discount to its fair value. This implies the market is very nearly in sync with experts’ assessment of Alibaba’s true worth.
Story Continues
Result: ABOUT RIGHT
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alibaba Group Holding.
BABA Discounted Cash Flow as at Sep 2025
Simply Wall St performs a valuation analysis on every stock in the world every day (check out Alibaba Group Holding’s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.
The Price-to-Earnings (PE) ratio is widely considered one of the most suitable valuation tools for profitable companies like Alibaba Group Holding. It helps investors gauge how much the market is willing to pay today for each dollar of earnings the company generates. Naturally, a higher PE ratio indicates greater growth expectations, while a lower one may reflect higher perceived risks or more modest growth. What is considered a “normal” or “fair” PE ratio therefore depends on a company’s growth trajectory, risk profile, and the industry it competes in.
Currently, Alibaba trades at a PE ratio of 18.5x, which is notably lower than the peer average of 43.7x and also below the Multiline Retail industry average PE of 21.9x. This comparison might initially suggest Alibaba is undervalued relative to both its sector and its direct competitors. However, peers and industry averages do not always tell the whole story because they do not adjust for important differences like company size, growth rate, profit margins, and risk levels.
This is where the Simply Wall St “Fair Ratio” comes into play. The Fair Ratio for Alibaba, calculated with factors such as earnings growth, industry, profit margins, market cap, and risk, is estimated at 28.8x. This approach gives a more nuanced and tailored benchmark that better reflects Alibaba’s unique position, rather than a one-size-fits-all industry number. Since Alibaba’s current 18.5x PE is meaningfully below this Fair Ratio, the analysis signals that the stock is undervalued by this measure and may have room for potential upside if the market closes this gap.
Result: UNDERVALUED
NYSE:BABA PE Ratio as at Sep 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, powerful tool that lets you attach your own story or perspective to a company’s future, turning your view on Alibaba’s strategy, risks, and opportunities into concrete numbers like fair value, projected earnings, and margins.
Instead of just looking at price multiples or static forecasts, a Narrative connects the company’s unique story to a custom financial forecast and calculates what you believe is a justified price. Narratives are easy to build and use right on Simply Wall St’s Community page, where millions of investors exchange perspectives every day.
With Narratives, you can quickly see if your view on Alibaba’s future justifies buying or selling by directly comparing your calculated fair value to the current market price. Best of all, Narratives are dynamic and are updated in real-time when news or new earnings reports are released, helping you respond quickly as the story changes.
For example, one investor’s Narrative might predict strong AI-driven revenue growth and set Alibaba’s fair value at $179.82 per share, while another, more cautious user could focus on trade and regulatory risks and see fair value at just $107.09 per share. This shows there is no single “right” answer, only perspectives backed by your assumptions and reasoning.
For Alibaba Group Holding, we’ll make it really easy for you with previews of two leading Alibaba Group Holding Narratives:
🐂 Alibaba Group Holding Bull Case
Fair Value: $179.82
Current Price Discount: -4.4%
Revenue Growth: 8.7%
Heavy investment in AI, cloud, and quick commerce is expected to drive strong long-term revenue and margin growth, even as profits face some short-term pressure.
Strategic integration and partnerships, including with SAP, are expanding Alibaba’s reach and strengthening its position in digital services, with an emphasis on increasing user engagement and ecosystem stickiness.
Analysts forecast a 15.8% upside with continued revenue expansion, though large-scale investments carry risks of margin compression and depend on success in high-growth segments.
🐻 Alibaba Group Holding Bear Case
Fair Value: $107.09
Current Price Premium: 60.6%
Revenue Growth: 14.1%
Despite growing revenues and momentum in cloud and AI segments, the current stock price exceeds calculated fair value based on cash flow assumptions and macroeconomic risks.
Major risks include US-China trade tensions, regulatory pressures, currency exposure, and increased competition, which may limit Alibaba’s near-term valuation potential.
While operational performance is strong, the market appears to have already priced in expected growth, raising concerns about overvaluation and whether recent gains are sustainable.
Do you think there’s more to the story for Alibaba Group Holding? Create your own Narrative to let the Community know!
NYSE:BABA Community Fair Values as at Sep 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include BABA.
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