Upside: 44%

Price Target: $153

Time Horizon: 6 Months

Price as of 07/10/2025: $106

SOULBRIDGE'S RECOMMENDATION

BUY

Summary

Alibaba Group Holding Ltd. (BABA) is a wide-moat Chinese technology conglomerate undergoing strategic transformation. Despite domestic pressure from PDD and Douyin, its upside is supported by accelerating Cloud and AI revenues, new Taobao monetization tools, and expanding international platforms like AliExpress and Trendyol. The company’s solid balance sheet (debt-to-equity 0.3x, ROE 12%) and active buybacks reinforce valuation support. Using DCF and peer multiples, Soulbridge’s base-case target of $153 implies ~54% upside from $106, with bull and bear scenarios at $179 and $120 respectively. Key catalysts include AI-driven Cloud margins and monetization traction, while macro and regulatory risks in China remain the primary constraints. Overall, Alibaba offers an attractive risk-reward profile with 30% margin of safety to intrinsic value.

Investment Thesis

Thesis Summary

Alibaba remains a wide-moat platform in transition. Domestic commerce is pressured by PDD/Douyin, but Cloud + AI scaling, new Taobao monetization tools, and international expansion underpin upside. Capital returns provide support while risks center on China macro and regulation.

Value Drivers

• Cloud & AI mix shift – triple-digit AI revenue growth.

• Domestic monetization – Taobao software fees and Quanzhantui tools.

• Efficiency in non-core units, improving EBITA trajectory.

• International expansion – AliExpress/Trendyol scaling in EU/Gulf.

• Capital returns – ongoing buybacks through Mar-2027.

Strategic Narrative

• Mission: Make it easy to do business anywhere; 102-year vision.

• Strategy: User-first, AI-driven; focus on AI+Cloud, e-commerce, and platforms.

• Edge: Scaled Cloud, AI model leadership, network effects in commerce.

Why Now

Cloud acceleration and AI monetization are inflecting. New Taobao fees add incremental revenue. Recent $3.2B convertible issuance creates an overhang, but overall thesis supported by buybacks and Cloud optionality.

Valuation

Valuation Methods

• Discounted Cash Flow (DCF) with Discount Rate (WACC) and Long Term Growth

• Peer multiples (Price to Earnings, Enterpise Value/EBITDA, Enterpise Value/Sales, Price to Book Value)

• Scenario analysis (Bear/Base/Bull)

Valuation Assumptions

• Discount Rate (WACC): ~10%

• Long Term Growth: 3%

• Target margin: expanding with AI mix

• Capital Expenditure (CAPEX): ~6% sales

• Working capital: stable

Snapshot

Company Overview

Business Model

Multi-segment platform spanning China retail (TTG), Cloud Intelligence, International commerce (AIDC), logistics (Cainiao), and media.

Geographic Footprint

• China – core commerce & cloud

• Europe – AliExpress, Trendyol

• Gulf – AliExpress expansion

Recent Developments

• Cloud revenue acceleration; AI products triple-digit growth.

• Taobao software fee introduced, rebates phased out.

• Buyback program through 2027; share count reduced.

• Issued $3.2B zero-coupon convertible notes (Sept 2025).

Macro & Industry

Macro Factors

• China deflation pressure and stimulus uncertainty

• FX exposure CNY/USD

• Global trade tariff risk

Regulatory Environment

• Antitrust & competition oversight

• Disclosure requirements (SEC/HKEX)

• Capital structure regulation for converts

Industry Drivers

• AI adoption fueling cloud demand

• Shift to short-video/low-price commerce

• Cross-border logistics scale

Industry Opportunities

• AI-enabled monetization in Cloud

• New Taobao merchant fees

• International expansion in EU & Gulf

Industry Risks

• Competition from PDD/Douyin

• China macro weakness

• Capital structure dilution

Market Position

Wide moat, but vulnerable to domestic share erosion.

Differentiators

• Cloud + AI infrastructure scale

• Open-source Qwen model leadership

• Network effects across commerce/logistics

Consumer Trends

• Shift to low-price/short-video commerce

• AI-enabled merchant monetization tools

Forecast

Conclusion & Recommendation

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RECOMMENDATION : BUY

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Final Thesis

Alibaba is undervalued relative to peers and history. Cloud + AI scaling, Taobao monetization, and international expansion provide upside. Risks remain from competition and China macro, but current price offers 10–25% margin of safety to intrinsic value.

Actionable Recommendations

• Accumulate shares around $141 with upside to $165–$179

• Size exposure prudently due to China macro/regulatory risk

• Maintain exposure through Cloud/AI catalysts

• Consider hedging ADR volatility

Monitoring Triggers

• Cloud growth & AI margins

• Taobao monetization adoption

• Competitive share trends vs PDD/Douyin

• China macro indicators

• Capital structure/dilution events

Historical

Date Added: July 25, 2025 | Recommendation: BUY |

This report has been prepared by Soulbridge Corp (“Soulbridge”) for informational and educational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor does it constitute investment, financial, legal, or tax advice. The information, estimates, and opinions expressed herein reflect publicly available data and sources believed to be reliable, but Soulbridge makes no representation or warranty, express or implied, as to their accuracy or completeness.

Any forward-looking statements, valuation targets, or scenario analyses are inherently uncertain and subject to change without notice. Actual outcomes may differ materially due to a wide range of risks, including market, regulatory, macroeconomic, and company-specific factors.

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Soulbridge, its affiliates, or employees may hold positions in securities mentioned in this report, but such positions do not influence the research content.

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