Alibaba's Bull Run Ahead of Earnings: Can the Stock Sustain Momentum?

Alibaba Group (BABA) has entered a critical phase in 2025, with its stock surging 6% in early May amid optimism over AI-driven growth and cloud investments. As the company prepares to report Q4 FY2025 earnings on May 15, investors are weighing whether this momentum can outpace lingering risks like U.S.-China trade tensions and valuation concerns.

Stock Performance and Analyst Sentiment: A Bullish Setup

Alibaba’s shares have climbed to $126.58 as of May 2025, marking a 42% year-to-date gain despite tariffs on Chinese goods. Analysts remain bullish, with a $160.51 average target price—implying a 27.6% upside—driven by confidence in its cloud and AI strategies. The Zacks Rank #2 (Buy) further underscores this optimism, as earnings estimates for the fiscal year have risen by 1.2% in just a month.

Yet caution lingers. GuruFocus estimates a $109.34 price target in one year, suggesting a potential 13% downside. Analysts note conflicts of interest in bullish reports and emphasize fundamentals over targets.

Strategic Moves Fueling Growth

Alibaba’s $11.9 billion share repurchase program—trimming its share count by 5.1%—has directly boosted earnings per share (EPS). Meanwhile, its $53 billion three-year investment in AI and cloud infrastructure is pivotal. Alibaba Cloud, a key revenue driver, is expanding into global markets, while its B2B platform Alibaba.com surged to #1 in Apple’s U.S. shopping app rankings, signaling stronger Western demand.

The company’s AI initiatives, including the Qwen chatbot and Tmall Genie smart speaker, are also gaining traction. These innovations align with its seven core segments, from Taobao and Tmall in China to AliExpress and Lazada abroad.

Financial Metrics: Mixed Signals

Alibaba’s P/E ratio of 18.36 remains below the industry average (23.6), suggesting undervaluation. Its 1.59% dividend yield outperforms the internet retail sector’s 0.6%, attracting income-focused investors. However, its implied growth rate of 4.6% trails the industry’s 7.5%, reflecting cautious expectations.

The P/B ratio of 3.3 adds complexity: while above the industry average (2.2), it signals confidence in asset value amid tech investments.

Upcoming Earnings: The Pivot Point

The May 15 earnings report will test whether Alibaba can validate its growth narrative. Analysts will scrutinize cloud revenue growth, AI adoption rates, and the impact of U.S. tariffs. A strong beat could lift shares toward $160+, while a miss might reignite valuation debates.

Risks and Considerations

• Trade Tensions: Tariffs remain a headwind, but Alibaba’s 42% YTD gain suggests resilience.
• Valuation Concerns: The GuruFocus warning and low implied growth rate hint at overextension in some areas.
• Execution Risks: Scaling AI and cloud globally requires flawless execution, which hasn’t been guaranteed in past expansions.

Conclusion: A High-Stakes Gamble on Innovation

Alibaba’s stock sits at a crossroads. On one hand, $11.9 billion in buybacks, AI/cloud investments, and strong U.S. market penetration justify the $160 average target. On the other, valuation risks and macro headwinds could cap gains.

The May 15 earnings report is pivotal. If Alibaba shows sustained cloud growth (Alibaba Cloud grew 19% YoY in Q3 FY2025) and AI monetization progress, the stock could sustain its bull run. Conversely, a stumble could see it retreat toward $100—near GuruFocus’s one-year estimate.

Investors should balance the 27.6% upside potential against the 13% downside risk. For now, the data tilts cautiously bullish: strong analyst consensus, Zacks’ top-tier ranking, and the stock’s resilience amid tariffs suggest Alibaba is worth watching—but not without a close eye on May’s results.

The verdict? Hold for the earnings, then decide.