Assessing Alibaba’s Share Price After a 120% Rally in 2025

If you have been watching Alibaba Group Holding's stock recently, it is hard not to notice the dramatic swings and the sense that something big might be brewing beneath the surface. With the share price closing at $187.22 most recently, investors have seen a remarkable rally: up 4.1% in just a week, a massive 38.1% in 30 days, and 120.4% year-to-date. Even the one-year climb of 62.0% makes headlines, though long-term holders may still be wary since the five-year mark sits at -35.7%. The story here is one of volatility driven by shifts in perception, sometimes tied to fresh optimism about growth or a drop in perceived risk, even in the absence of splashy news.

While recent industry updates have kept the wider market energized, Alibaba's price surge seems more about changing investor sentiment than any direct news flash. With these kinds of returns, it is completely fair to ask, "Is Alibaba undervalued or are we getting ahead of ourselves?" That is where a valuation check comes in, and on our scorecard, Alibaba lands a 3 out of 6: three green checks for undervaluation and three spots where there might be more stretch. It is the perfect jumping-off point to consider how different valuation methods measure Alibaba's true worth, and why one approach in particular could give you a clearer answer than the rest.

Alibaba Group Holding delivered 62.0% returns over the last year. See how this stacks up to the rest of the Multiline Retail industry.

Approach 1: Alibaba Group Holding Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates the intrinsic value of a stock by projecting the company's future cash flows and discounting them back to their present value. This method aims to answer the question: what is Alibaba worth today, if we account for all the cash it is expected to generate in the future?

For Alibaba Group Holding, the latest reported Free Cash Flow (FCF) stands at approximately CN¥83.1 billion. Analyst expectations have projected steady growth, with FCF rising to as much as CN¥134.8 billion by 2028. Beyond that, Simply Wall St’s model extends the projections out ten years, with estimates reaching over CN¥211.8 billion in 2035. All figures are reported in Chinese Yuan.

Using these projections under the 2 Stage Free Cash Flow to Equity DCF model, the estimated intrinsic value per share comes in at $159.59. Compared to the current share price of $187.22, this implies the stock is trading about 17.3% above its intrinsic value, suggesting it is overvalued by DCF analysis.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alibaba Group Holding.

Our Discounted Cash Flow (DCF) analysis suggests Alibaba Group Holding may be overvalued by 17.3%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Alibaba Group Holding Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a preferred valuation tool for profitable companies like Alibaba, since it tells investors how much they are paying for each dollar of earnings. By relating the company’s share price to its profits, the PE ratio helps gauge whether a stock is reasonably priced based on its ability to generate earnings.

What determines a “fair” PE ratio? Companies with faster growth prospects typically command higher PE ratios, as investors are willing to pay more for future earnings. At the same time, higher risks or weaker profit margins can constrain how high a PE multiple should go. Therefore, a fair PE takes into account not just current earnings but also the outlook for growth, profitability, and company-specific risks.

Currently, Alibaba trades at a PE ratio of 20.1x, which is just below the Multiline Retail industry average of 21.8x and well under the peer group average of 48.6x. However, Simple Wall St’s proprietary “Fair Ratio” for Alibaba, which considers its earnings growth potential, industry, profit margins, size, and risk, comes in at 29.5x. This model is especially helpful because it adjusts for the unique characteristics of each business, rather than relying broadly on industry or peer averages that may not reflect Alibaba’s specific situation.

With Alibaba’s actual PE (20.1x) nearly 10 points below the calculated Fair Ratio (29.5x), the stock appears undervalued by this metric. It is trading lower than what would be expected given its role in the industry and prospects for growth. This suggests investors might be getting a comparatively good deal.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Alibaba Group Holding Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This dynamic approach lets you tell your own story about Alibaba, connecting what you believe about its future with clear financial forecasts and a fair value estimate.

A Narrative is more than just numbers on a page. It is your perspective on Alibaba, combining your views on revenue growth, profit margins, and business trends into a single, coherent financial outlook. Narratives link what is happening in the business, or the market as a whole, to what you think Alibaba’s shares are actually worth right now.

Narratives are easy to use and available to everyone within Simply Wall St’s Community page, where millions of investors share and debate them. This tool helps you decide when to buy or sell by comparing your own Fair Value with the current market price, so you can act with conviction rather than just following the crowd.

Best of all, Narratives update automatically as new data, news, or earnings come in, keeping your investment thesis fresh and relevant without any extra work. For example, on Alibaba Group Holding, some investors use a Narrative that values the company at $107 per share based on regulatory and trade risks, while others see a fair value of $180 per share, focusing on the company’s AI and cloud expansion. Which perspective fits your view?

Do you think there's more to the story for Alibaba Group Holding? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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