<div id="readability-page-1">Alibaba Group (BABA 2.65%), China's largest e-commerce and cloud infrastructure company, was once considered a great growth stock. From fiscal 2015 to fiscal 2022 (which ended in March 2022), its revenue and adjusted earnings per share (EPS) expanded at a compound annual growth rate (CAGR) of 41% and 21%, respectively. That explosive growth was driven by the strength of its Taobao and Tmall marketplaces in China, the rising usage of its cloud-based services, and the expansion of its ecosystem with its smaller brick-and-mortar retail, cross-border commerce, logistics, and media segments. Alibaba went public at $68 per American depositary share (ADS) in September 2014, and its stock more than quadrupled to a record closing price of $310.29 on Oct. 27, 2020. At the time, it seemed like one of the safest and simplest plays on China's booming e-commerce and cloud markets. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjYxNTUvdW1icmVsbGEtc2hhbmdoYWkuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjYxNTUvdW1icmVsbGEtc2hhbmdoYWkuanBnJnc9NzAw"/>Image source: Getty Images. </div> But today, Alibaba's stock trades at around $120. That decline was caused by two major challenges. First, China's antitrust regulators hit its e-commerce business with a record fine in 2021 and shackled it with new restrictions. Those setbacks eroded Alibaba's defenses against fierce competitors like PDD Holdings and JD.com. Second, the macro headwinds in China disrupted the growth of its e-commerce and cloud businesses. From fiscal 2022 to 2025, Alibaba's revenue and adjusted net income both grew at a CAGR of 5%. That slowdown convinced many investors its high-growth days were over, but its stock now trades at just 16 times this year's earnings. The bulls argue that the valuation is too cheap to ignore, while the bears claim its risks justify that lower multiple. Let's see which argument makes more sense. <h2>Is Alibaba's business finally stabilizing?</h2> Over the past year, Alibaba's revenue growth broadly stabilized, its operating margin rose to the double digits, and its adjusted EPS growth turned positive again. <div><table><colgroup><col width="166"/> <col width="72"/> <col width="73"/> <col width="79"/> <col width="68"/> <col width="70"/> </colgroup> <tbody> <tr> <th> Metric </th> <th> Q4 2024 </th> <th> Q1 2025 </th> <th> Q2 2025 </th> <th> Q3 2025 </th> <th> Q4 2025 </th> </tr> <tr> <td> Revenue growth (YOY) </td> <td> 7% </td> <td> 4% </td> <td> 5% </td> <td> 8% </td> <td> 7% </td> </tr> <tr> <td> Operating margin </td> <td> 7% </td> <td> 15% </td> <td> 15% </td> <td> 15% </td> <td> 12% </td> </tr> <tr> <td> Adjusted EPS growth </td> <td> (5%) </td> <td> (5%) </td> <td> (4%) </td> <td> 13% </td> <td> 23% </td> </tr> </tbody> </table></div> Data source: Alibaba. In CNY terms. YOY = Year-over-year. Fiscal years end March 31. For the full year, its revenue and adjusted EPS rose 6% and 5%, respectively. That still represented a slowdown from its 8% revenue growth and 14% adjusted EPS growth in fiscal 2024, but it indicated its business was gradually stabilizing. That stabilization was supported by the growth of its overseas e-commerce marketplaces (Lazada in Southeast Asia, Trendyol in Turkey, Daraz in South Asia, and AliExpress for its cross-border purchases), which offset Taobao and Tmall's softer growth in China; the expansion of its logistics business for third-party customers, and AI-driven tailwinds for its cloud business. It also bought back 5.1% of its shares for $11.9 billion in fiscal 2025, and it plans to allocate a lot more cash to its future buybacks. From fiscal 2025 to 2028, analysts expect Alibaba's revenue and EPS to grow at a CAGR of 7% and 11%, respectively. That growth should be driven by its recent catalysts, new live streaming features and more competitive discount offerings for its domestic marketplaces, and potential spinoffs or initial public offerings (IPOs) for its cloud and logistics divisions. A favorable trade deal between the U.S. and China would also alleviate some pressure on the Chinese economy and ignite fresh consumer and cloud spending. <h2>So is Alibaba's stock too cheap to ignore?</h2> Alibaba's high-growth days are probably over, and it still faces plenty of macro, competitive, and regulatory challenges. But if you expect the trade tensions to eventually ease, China's economy to keep growing, and for Alibaba to stay at the top of its expanding e-commerce and cloud markets, then its stock seems too cheap to ignore at these levels. </div>

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Alibaba Group, once a high-growth stock, now faces challenges with its valuation at around $120, down from a peak of $310.29. Factors include regulatory fines and macroeconomic headwinds, leading to a slowdown in revenue growth. However, recent stabilization in revenue and operating margins, along with share buybacks and potential growth catalysts, suggest a cautious optimism. Analysts project a 7% revenue and 11% EPS growth from fiscal 2025 to 2028. The debate continues on whether Alibaba's stock is undervalued or if risks justify its lower multiple.

- Alibaba Group, once a high-growth stock, has seen its revenue and adjusted earnings per share grow at a CAGR of 41% and 21% from fiscal 2015 to 2022, driven by its e-commerce and cloud services.  
- Currently trading around $120, the stock has faced challenges from regulatory fines and macroeconomic headwinds, leading to a slowdown in growth, with revenue and adjusted EPS rising only 6% and 5% in the last fiscal year.  
- Analysts project a CAGR of 7% for revenue and 11% for EPS from fiscal 2025 to 2028, supported by overseas expansion and potential market catalysts, but the company still faces significant risks.  

Is Alibaba's Valuation Way Too Cheap -- or a Justified Risk?