Is Alibaba Group Holding Ltd. (NYSE:BABA) the Most Promising Stock According to Analysts?
We recently published a list of the 11 Most Promising Stocks According to Analysts. In this article, we are going to take a look at where Alibaba Group Holding Ltd. (NYSE:BABA) stands against other promising stocks.
On April 23, Stephen Parker, JPMorgan Private Bank co-head of global investment strategy, joined 'Squawk Box' on CNBC to express that investors should have a normal level of risk in their portfolios right now. Parker explained that while he is fully in support of remaining invested in the market, he does recommend clients to stay focused on sectors that may be more resilient in a downturn to help protect against losses while staying long. His baseline guidance is for clients to maintain a normal level of risk in their portfolios. Those holding too much cash should get invested, and those overexposed to US markets and the dollar should consider adding non-US exposure. He advised that this is a period where investors must be comfortable with discomfort, as policy uncertainty broadens the range of possible outcomes.
Parker acknowledged that while downside risks are top of mind for many investors, there is also upside potential, especially if there are positive policy surprises, such as clarity on tariffs, which could drive markets back to their highs sooner than expected. His outlook for the S&P 500 index is a wide range, with the high end being flat for the year and a possible range of 5,700-6,200. This reflects heightened policy uncertainty and difficulty in pinpointing a single target. Parker pointed out that even if it takes two years for markets to return to all-time highs, an 8% annual return would still be compelling for equities. Reflecting on the start of the year, he noted that market multiples were considered rich following 2 consecutive years of 20%+ gains. There was optimism around deregulation and changes to corporate taxes, but few expected the S&P 500 to remain flat for 2 years from a level of 6,200. Parker further explained that even without pro-business policy changes, the market may have faced challenges after such strong recent gains. The pullback in high-performing segments of the US market has brought valuations closer to what he considers normal levels, which also sets the stage for potential upside.
Our Methodology
We sifted through the Finviz stock screener to compile a list of the top stocks that had high analysts' upside potential (at least 35%). The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey's database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An e-commerce platform displaying a wide range of products to customers online.
Number of Hedge Fund Holders: 107
Average Upside Potential as of April 23: 40.83%
Alibaba Group Holding Ltd. (NYSE:BABA) offers technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses engage with their users and customers. It has seven segments and also operates Taobao and Tmall, which are digital retail platforms. It also offers Alimama, which is a proprietary monetization platform.
On March 28, Mizuho analyst James Lee pointed out Alibaba's strong AI strategy for enhanced internal productivity and product experiences. Alibaba has planned substantial AI infrastructure spending over the next 3 years. This is exemplified by the development of Qwen 2.5 Max, which is Alibaba's most advanced LLM to date, with applications across various AI tasks. Qwen AI is the company's family of LLMs, with over 90,000 derivative models.
Moreover, Barclays noted that the growth of Alibaba's cloud business is accelerating. Alibaba Group Holding Ltd.'s (NYSE:BABA) cloud computing division improved by 13% year-over-year in FQ3 2025 due to rapid AI expansions. As the company continues to sell AI-related services to its customers, Barclays anticipates that the margins of Alibaba's cloud unit will potentially improve going forward. The firm kept a $180 price target and an Outperform rating on the stock.
Patient Capital Opportunity Equity Strategy invested in Alibaba due to its discounted valuation and potential for Chinese stimulus. It stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q1 2025 investor letter:
'Alibaba Group Holding Limited (NYSE:BABA) rebounded strongly in the first quarter following DeepSeek's surprise AI product launch in early January that caught markets off guard. The development boosted expectations of improving competitiveness in a market largely considered 'un-investable'. We've long appreciated Alibaba as it continued trading at a significant discount to its sum-of-the-parts valuation. With most investors writing off Chinese companies while our assessment of the odds of Chinese stimulus grew, we saw an opportunity to invest in a high-quality business at rock bottom prices. During this period, the company initiated both a dividend (1.0% Yield) and buyback program, repurchasing 7% of shares outstanding over the last twelve months. Unfortunately, much of the gains achieved in the first quarter have been reversed following escalating tariff tensions between the US and China. While the ultimate impact of tariffs remains uncertain, Alibaba has limited exposure to international markets with only 12% of revenue currently coming from outside of China. Though a tariff war broadly hurts economic activity and can create negative feedback loops into domestic demand, we believe Alibaba stands as one of the more insulated Chinese companies in this environment.'
Overall, BABA ranks 8th on our list of the most promising stocks according to analysts. While we acknowledge the growth potential of BABA, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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