Alibaba Group Holding Limited (BABA): A Bull Case Theory

We came across a bullish thesis on Alibaba Group Holding Limited (BABA) on Modern Valye Investing’s Substack by Value Investigator. In this article, we will summarize the bulls’ thesis on BABA. Alibaba Group Holding Limited (BABA)'s share was trading at $112.87 as of 13^th June. BABA’s trailing and forward P/E were 15.15 and 11.34 respectively according to Yahoo Finance.

Alibaba’s current valuation presents a deeply compelling opportunity when anchored to fundamentals. At the core lies Taobao and Tmall Group (TTG), China’s dominant e-commerce platform, which despite fierce competition, maintains a 44% EBITDA margin and robust cash generation. Assuming a conservative 3% annual revenue growth—well below China’s nominal GDP trajectory—and flat margins, TTG is projected to generate RMB 150 billion in earnings over the next 12 months. Applying an 18x multiple to this muted base case yields a valuation of RMB 2700 billion (USD $376B), exceeding Alibaba’s entire market cap of RMB 1953 billion (USD $272B).

This implies investors are effectively paying for TTG at a 28% discount, while receiving all other assets—Ant Group, international commerce, logistics, and notably, the Cloud Intelligence Group—for free.

That cloud segment is seeing a marked inflection. Historically stymied by regulatory and cost barriers, China's cloud adoption is now accelerating as generative AI creates a structural demand shift. Alibaba Cloud, already the market leader with 36% share, benefits from deep integration across commerce, proprietary AI tools (Qwen LLMs), and a hyperscale GPU infrastructure.

In Q1 FY25, cloud revenue surged 18% YoY—the strongest pace since 2021—driven by AI workloads and disciplined pricing. With the market forecasted to grow at 20% CAGR through 2030, Alibaba Cloud’s path to RMB 717 billion (~$100B) revenue by 2035 is increasingly credible.

In sum, Alibaba offers a high-quality, cash-generative core business at a discount, with free upside optionality in cloud, AI, and fintech—an asymmetric opportunity for long-term investors.

Previously, we covered a bullish thesis on Alibaba by Kontra Investments in March 2025, emphasizing a rebound in Taobao/Tmall and cloud growth amid rising AI demand, despite fierce pricing competition. The thesis by Modern Value Investing deepens the valuation case—arguing that Alibaba’s core e-commerce business alone justifies its market cap, effectively giving investors free exposure to its cloud, fintech, and international assets.

Alibaba Group Holding Limited (BABA) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 125 hedge fund portfolios held Alibaba Group Holding Limited (BABA) at the end of the first quarter which was 107 in the previous quarter. While we acknowledge the risk and potential of BABA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.