Since the launch of its flagship model, Qwen 2.5, on January 29, Alibaba has seen a surge in its stock value, marking a remarkable 23% increase. This performance is even more significant when placed in context with the wider market trends. The rise comes amid a broader decline in the tech sector, particularly following a notable drop in NVIDIA's stock value after the release of the DeepSeek night. In contrast, Alibaba's growth over the last few weeks highlights its resilience and ability to outperform not only its competitors but also the market as a whole. This shift has captured the attention of analysts, who have increasingly turned their focus to the underlying factors propelling Alibaba's positive momentum.

On February 13, a team of analysts from JPMorgan Chase, including Yao Cheng, Zhang Zhihao, and Chen Qi, released a comprehensive report assessing Alibaba’s valuation and future growth potential. The findings have provided a clearer picture of the company’s future trajectory, emphasizing a combination of internal factors and external market conditions that could continue to drive its stock price higher. These analysts believe that the current surge in Alibaba’s stock is only the beginning, driven by three main factors that could significantly impact its long-term growth prospects.

Alibaba Cloud: The Hidden Gem

The first factor identified in the JPMorgan report revolves around the reevaluation of Alibaba Cloud’s market position. As the leading player in China’s cloud computing space, Alibaba Cloud has long been recognized as an essential pillar of the company’s overall growth strategy. However, the analysts argue that the current market undervalues this segment. According to their projections, Alibaba Cloud’s enterprise value-to-revenue multiple for 2025 is expected to be just four times, which is surprisingly low when compared to its U.S. counterparts.

The analysts contend that Alibaba Cloud’s valuation should align more closely with the average multiples seen in publicly listed Software as a Service (SaaS) companies in the U.S. Based on an average multiple of 6.5 times, they estimate that Alibaba Cloud could be worth approximately $115 billion, a significant uptick from its current valuation. If such a re-evaluation were to occur, it would not only elevate Alibaba Cloud’s worth but also push Alibaba’s overall market capitalization up to $320 billion. This adjustment would imply a 14% potential increase in stock price.

Further amplifying the potential is the possibility of applying even higher valuation multiples. For instance, using Microsoft’s 10.5 times multiple would push Alibaba Cloud’s value to an eye-watering $185 billion, which in turn would raise Alibaba’s total market value to nearly $391 billion. While this estimation may appear ambitious, it underscores the considerable room for upward movement in Alibaba Cloud’s valuation, further fueling optimism for the company’s stock performance.

Revenue Growth and E-Commerce Optimism

Beyond Alibaba Cloud’s potential for reevaluation, analysts point to other drivers that are expected to fuel Alibaba’s stock price growth in the coming months. One of the most important of these is the increase in revenue expectations for Alibaba Cloud. Despite the conservative 10% revenue growth forecast for the fiscal year 2026, analysts believe there is room for an additional 10 percentage points of growth. This optimism stems from the continuing shift toward digital transformation in China and around the world, along with Alibaba Cloud’s increasing capabilities in areas like artificial intelligence, big data, and machine learning.

To illustrate the impact of this revenue growth, analysts calculate that for every two percentage points of increase in Alibaba Cloud’s revenue growth rate, the company’s stock could rise by 1%. This sensitivity to performance in the cloud segment highlights just how pivotal Alibaba Cloud has become in driving the company’s overall valuation and stock price. As Alibaba’s competitors—especially global giants like Amazon and Microsoft—expand their cloud services, Alibaba’s ability to capture a larger share of the market will be critical to sustaining long-term growth.

Simultaneously, the analysts highlight the positive outlook for Alibaba’s e-commerce activities, particularly in terms of profitability. They project that Alibaba’s adjusted earnings per share for the fiscal year 2026 will surpass market consensus by around 12%. This expectation is based on the assumption that Alibaba’s domestic e-commerce operations will continue to improve in terms of both volume and efficiency. The company’s dominant platforms, Taobao and Tmall, remain key revenue drivers, with analysts particularly optimistic about their growth prospects in the coming quarters.

E-Commerce Growth Drivers and Strategic Investments

Looking ahead, analysts believe that Alibaba’s e-commerce platforms will benefit from a variety of factors, including promotional campaigns, the expansion into new product categories, and increasingly sophisticated traffic management strategies. These efforts are expected to drive a noticeable improvement in Gross Merchandise Volume (GMV) growth for Taobao and Tmall in the third quarter of the 2025 fiscal year. Additionally, the anticipated increase in customer management income, attributed to better service management for merchants and optimized advertising strategies, should help accelerate growth within the e-commerce segment.

Moreover, while short-term profitability might not be the primary focus for Alibaba in the coming years, the company is expected to continue investing heavily in long-term growth. The 2025 fiscal year marks the first year of a three-year investment cycle for the Taobao Tmall Group, during which Alibaba is likely to prioritize market expansion, technological advancements, and supply chain optimization. These efforts should bolster the platforms' competitiveness over time, with the aim of stabilizing market share, improving monetization capabilities, and controlling costs more effectively. As a result, profitability should improve as these investments begin to bear fruit in the medium to long term.

JPMorgan’s report emphasizes that Alibaba’s management is strategically focused on laying the groundwork for sustained growth and profitability. While the company may not prioritize short-term profitability during this investment cycle, the overall trajectory suggests that once these investments stabilize, Alibaba’s profitability will follow suit. In turn, this strategy is expected to support Alibaba’s stock price over the coming years, making it an attractive proposition for long-term investors.

The Path Forward: A Competitive Edge in a Changing Market

For Alibaba, the future looks promising, but the company must continue navigating a competitive landscape that is increasingly shaped by both domestic and global forces. The company’s ability to innovate within the cloud space, drive profitability in its e-commerce operations, and effectively manage its investments will be key to sustaining its upward momentum.

Alibaba’s resilience in the face of external challenges—whether regulatory pressures, competitive threats, or broader economic factors—demonstrates its adaptability. The company’s growing dominance in cloud services, coupled with its established leadership in e-commerce, provides a solid foundation for continued growth. However, the company must remain agile and responsive to the evolving needs of the market, ensuring that its investments pay off as expected and its platforms continue to meet the demands of both consumers and businesses alike.

In conclusion, Alibaba’s recent stock surge is indicative of a broader trend: the company’s ability to position itself for future growth across multiple sectors. The factors outlined in JPMorgan’s report—revised cloud valuations, increased revenue expectations, and e-commerce profitability—suggest that Alibaba’s stock has significant room to grow. While challenges remain, particularly with regard to market competition and ongoing investments, Alibaba’s long-term prospects are increasingly favorable, making it a company to watch in the years to come.