When Alibaba Group (NYSE: BABA) went public at $68 per share on Sept. 18, 2014, it raised $25 billion and became the largest initial public offering (IPO) in U.S. history. At the time, the bulls were impressed by the Chinese e-commerce and cloud leader’s rapid growth rates.
On Oct. 27, 2020, Alibaba’s stock reached its record high of $312.87. That was a near five-bagger gain for its initial investors, and many analysts were convinced its stock could go even higher over the next few years.
Image source: Alibaba.
But today, Alibaba’s stock trades at about $81. Its growth cooled off as it faced tougher regulatory, macroeconomic, and competitive headwinds, and the bulls hastily retreated. Nevertheless, that sell-off might still represent a golden buying opportunity for long-term investors who can stomach all the near-term volatility. In fact, I believe Alibaba’s stock could rise by at least 10 times over the next decade if it resolves its most pressing issues.
What are Alibaba’s most pressing challenges?
Back in 2021, China’s antitrust regulators hit Alibaba with a record $2.75 billion fine and barred its e-commerce business from locking in its merchants with exclusive deals, using aggressive loss-leading promotions, and making unapproved investments. Those restrictions eroded Alibaba’s defenses against aggressive competitors like PDD Holdings and JD.com. China’s economy also struggled to expand through the COVID-19 pandemic, and the government hobbled its own recovery with unpredictable “zero-COVID” lockdowns. Alibaba’s cloud business also struggled as the macro headwinds drove companies to rein in their software spending.
That messy mix of regulatory, competitive, and macro headwinds caused Alibaba’s growth to decelerate significantly in fiscal 2022 and fiscal 2023 (which ended last March). But in fiscal 2024, its top- and bottom-line growth accelerated again.
Metric
FY 2021
FY 2022
FY 2023
FY 2024
Revenue growth
41%
19%
2%
8%
Adjusted net income growth
30%
(21%)
4%
11%
Data source: Alibaba.
That acceleration was driven by the expansion of its overseas e-commerce marketplaces…
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