Alibaba Stock Surges on Potential Apple AI Partnership; Options Market Buzz

Alibaba Group Holding Ltd (NYSE: BABA) shares surged on Wednesday, February 12, 2025, following reports of a potential partnership with Apple Inc. (NASDAQ: AAPL) to bring Apple Intelligence features to China. The news has sparked significant interest in the options market, with a notable increase in trading activity.

Alibaba and Apple have reportedly co-developed AI features tailored to the Chinese user base and submitted them to Chinese regulators for approval. If successful, this partnership could bring a significant driver of iPhone upgrades to the Chinese market, where Apple's sales have struggled in recent months.

Options Market Buzz
The potential partnership between Alibaba and Apple has generated substantial interest in the options market. According to Schaeffer's Senior Quantitative Analyst Rocky White, Alibaba stock has seen a significant increase in options volume over the past two weeks, with 4.2 million calls and 1.09 million puts changing hands in the last 10 sessions alone. The most popular contracts have been the weekly 1/31 100-strike call and the February 110 call.

Alibaba's Strong Fundamentals and Growth Potential
Alibaba's recent rally comes on the heels of strong fundamentals and growth potential. The company has been benefiting from solid momentum in its Alibaba International Digital Commerce Group (AIDC) business, which includes Lazada, AliExpress, Trendyol, Alibaba.com, and other businesses operating in the international retail and wholesale markets. AIDC generated revenues of RMB 29.29 billion ($4.03 billion) in fiscal first-quarter 2025, marking a substantial 32% year-over-year increase.

Alibaba's aggressive integration of artificial intelligence across its operations positions it at the forefront of technological innovation. The company has successfully implemented AI solutions to improve cross-platform product listings, multilingual search capabilities, and targeted recommendations. This technological edge has particularly resonated with SMEs, with 17,000 businesses already subscribing to the AI Business Assistant on Alibaba.com.

Alibaba's strong financial health makes it an attractive investment proposition. With a net cash position of RMB 405.75 billion ($55.8 billion) and free cash flow of RMB 17.4 billion ($2.4 billion) as of June 2024, the company maintains a robust balance sheet. This financial strength has enabled significant shareholder returns, including the repurchase of 613 million ordinary shares worth $5.8 billion in the recent quarter.

Looking ahead, Alibaba is expected to generate fiscal 2025 revenues of $140.46 billion, indicating 7.63% year-over-year growth. The Zacks Consensus Estimate for fiscal 2025 earnings has also seen an upward revision of 3% over the past 30 days to $8.94 per share.

Alibaba's Attractive Valuation
Alibaba is currently trading at a discount with a forward 12-month Price/Earnings ratio of 10.5X compared with the industry's 24.71X and lower than the median of 15.92X. This valuation metric indicates that Alibaba's stock is significantly undervalued compared to its industry peers, trading at less than half the industry average P/E ratio. The lower-than-median forward P/E suggests an attractive entry point for investors, as the stock appears to be trading below its fair market value despite strong fundamentals. It also has a Value Score of A, which is hard to ignore.



In conclusion, Alibaba's potential partnership with Apple to bring Apple Intelligence features to China has sparked significant interest in the options market. The company's strong fundamentals, growth potential, and attractive valuation make it an attractive investment opportunity for the near term. However, investors should remain cautious about potential risks and challenges associated with the integration of Alibaba's AI features into Apple's iPhones.