In recent weeks, the financial world has witnessed significant developments within the technology and e-commerce sectors, with companies like Alibaba gaining notable attention. A key factor behind this rise is the market’s reaction to the company’s release of its flagship AI model, Qwen 2.5, on January 29. Since then, Alibaba’s stock price has surged by 23%, a clear indication of the market's optimism. However, the context surrounding this stock increase is just as significant as the performance itself. Alibaba’s impressive rise comes in the wake of a major drop in Nvidia's stock, following the DeepSeek event on January 24, marking a contrast between the fortunes of these two tech giants.

In a report released on February 13, analysts from JPMorgan, including Yao Cheng, Zhang Zhi Hong, and Chen Qi, provided an in-depth analysis of Alibaba’s potential. Their findings suggest that the company's stock still has considerable room to grow, fueled by three primary factors that are driving this upward trajectory.

The first critical aspect highlighted by the analysts is the undervaluation of Alibaba Cloud. As the leader in China’s rapidly expanding cloud computing market, Alibaba Cloud's valuation, according to JPMorgan, appears to be significantly lower than its actual worth. The analysts argue that the enterprise value-to-revenue multiple for Alibaba Cloud in 2025 is projected to be only 4 times, a valuation multiple far below that of smaller players in the Chinese cloud market, such as Kingsoft Cloud. This discrepancy, they suggest, signals that Alibaba Cloud is undervalued in comparison to its global competitors, particularly when contrasted with companies in the United States, such as Software as a Service (SaaS) providers.

A useful comparison can be made with Microsoft, a company that has a valuation multiple of approximately 10.5 times for its cloud business. If Alibaba Cloud were to command a similar valuation multiple, its intrinsic value could rise to an eye-popping $185 billion. Under such circumstances, Alibaba’s total market capitalization could reach as high as $391 billion, representing a 39% increase in stock price. While some analysts caution that this comparison may be overly optimistic, given the different business models and market positions of Alibaba and Microsoft, it still highlights the substantial growth potential embedded in Alibaba Cloud. Such an adjustment would, in turn, boost the company’s market value considerably, reinforcing Alibaba’s growing prominence in the cloud computing space.

In addition to the adjustment of Alibaba Cloud’s valuation multiples, JPMorgan’s report identifies two other factors that are likely to propel Alibaba’s stock price further. First, the analysts revised their revenue forecasts for Alibaba Cloud, expecting the business to grow at a rate of 10% in the fiscal year 2026. This modest forecast leaves room for growth, especially if the company manages to capitalize on new cloud computing trends and expand its client base. Furthermore, the report also suggests that for every 2% increase in revenue growth, Alibaba’s stock price is likely to experience a corresponding 1% increase, making the potential for sustained stock gains very real.

The second major catalyst driving Alibaba’s rise is its e-commerce business. Analysts anticipate that Alibaba will surpass market consensus estimates for earnings per share by roughly 12% in the fiscal year 2026. This is largely due to the favorable environment within China’s domestic e-commerce market, where the company’s platforms, including Taobao and Tmall, continue to show resilience despite macroeconomic challenges. The expected growth in e-commerce profits signals that Alibaba’s dominant position in China’s retail sector remains robust, even amid market fluctuations.

Moreover, looking to the third quarter of the 2025 fiscal year, analysts expect an increase in the Gross Merchandise Volume (GMV) of Alibaba’s platforms. This would be indicative of both a recovery and growth in customer management revenue, with a significant rebound in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the Taotian Group, Alibaba’s strategic business unit. The increase in GMV represents both an expansion in sales and a boost in Alibaba’s ability to manage its vast customer base effectively, two key drivers of its ongoing profitability.

Despite these positive forecasts, the analysts caution that investors must also consider Alibaba’s current position in its investment cycle. The fiscal year 2025 marks the beginning of a crucial three-year investment cycle for the Taotian Group, which will likely see the company prioritizing market expansion and the acquisition of resources over immediate profit generation. This long-term investment strategy places a greater emphasis on scaling the business and increasing customer retention, rather than seeking short-term profits. It’s expected that, during this period, Alibaba will focus on expanding its GMV and enhancing its customer management capabilities, positioning itself for long-term growth. Over time, as the company stabilizes its market share and improves its monetization strategies, the potential for increased profitability becomes far more tangible.

The importance of cost control strategies during this period cannot be overstated. For Alibaba to ensure sustainable growth in the future, it will need to manage expenses effectively while continuing to invest heavily in innovation and market expansion. As its market share in key segments solidifies, and its customer base becomes increasingly loyal, the company’s capacity to generate consistent and growing profits will improve, setting the stage for a more predictable and profitable future.

Alibaba’s performance highlights a broader trend in the technology and e-commerce sectors, where companies are recalibrating their strategies in response to evolving market conditions and consumer expectations. While the company’s growth in cloud computing and e-commerce continues to be a key driver of its success, it must also navigate challenges such as increased competition, regulatory pressures, and economic uncertainty. Despite these hurdles, Alibaba remains well-positioned to thrive in the coming years, provided it continues to execute its investment strategy effectively.

In addition, the company’s ability to adapt to changing market dynamics, particularly in the cloud and e-commerce spaces, will be critical in maintaining its competitive edge. As more businesses and individuals turn to cloud computing solutions and online shopping, Alibaba’s dominance in these areas is expected to grow. The company’s diversification into various business lines, from cloud services to logistics and digital media, further strengthens its position as a global leader in the digital economy.

The future trajectory of Alibaba’s stock price will depend heavily on how well it executes its long-term strategy. If the company can successfully scale its cloud services, enhance its e-commerce operations, and manage its investments wisely, the potential for substantial stock price appreciation remains high. As a result, Alibaba is becoming not just a survivor of market fluctuations but a standout performer in an increasingly competitive and rapidly changing business environment.

In conclusion, Alibaba’s recent performance and future prospects underscore the company’s resilience and adaptability in a fast-evolving market. With its leadership in the cloud and e-commerce sectors, coupled with a promising strategic investment plan, Alibaba is positioning itself for continued growth and success. While there are challenges ahead, the company's diversified approach and focus on long-term sustainability provide a solid foundation for its future. The market’s optimistic outlook for Alibaba suggests that it is on track to remain a dominant force in the global tech and e-commerce industries.