Is Alibaba Stock a Buy or a Sell as Trump Singles Out China for Tariffs?
And despite Trump singling out China for tariffs, Chinese stocks also gained yesterday.
For instance, Alibaba (BABA) stock gained 5.4% while Xpeng Motors (XPEV) rose 6.2%. In a previous article, I noted that taking some profits off the table in Alibaba would be prudent after its breathtaking rally in recent months. In this article, we'll explore whether BABA shares are worth your money now amidst the steep tariffs.
Chinese Stocks Rebounded After the Stimulus
While Chinese stocks were literally untouchable for many foreign investors as recently as a year ago, the market started warming up to them after September 2024. China began unveiling a flurry of stimulus measures to support its economy and reattract investment.
However, more powerful than the stimulus, Chinese President Xi Jinping's meeting with Chinese entrepreneurs including Alibaba's co-founder Jack Ma in February 2025 helped improve the sentiment toward Chinese shares.
Ma and Alibaba became the face of China's tech crackdown, so the meeting was quite an about-turn for the country's political leadership and a clear sign that the world's second-largest economy was backing its private sector amid the structural economic slowdown.
Alibaba to Benefit from the Revival in Chinese Consumption
Amid Trump's tariffs, China might announce further stimulus steps to support its economy. The country has already taken measures to revive domestic consumption, benefiting names like Alibaba, which is the largest e-commerce company in the country.
Moreover, Alibaba has emerged as a key player in the artificial intelligence (AI) space. Chinese companies offering goods at prices that most, if not all, Western manufacturers cannot match, is not really news. However, they are taking their price advantage to the services industry, as is visible in AI and autonomous driving.
Ever since DeepSeek shook the market with its low-cost AI model, several Chinese companies including Alibaba have announced cheap AI models that give competitors from U.S. tech giants a tough fight in terms of features while being offered at a fraction of the cost.
AI should drive Alibaba's next leg of growth as the company expands its prowess. Over the medium to long term, listing its fintech subsidiary Ant Financial would also help Alibaba unlock value. For context, that IPO was halted by China in 2020, apparently to target Ma. By meeting private entrepreneurs including Ma in February, the Chinese president has signaled that the crackdown on private tech companies is now in the rearview. With Alibaba now back in the 'good books' of the Chinese government, its regulatory woes appear over.
Should You Buy BABA Stock?
Regulatory challenges took a toll on Alibaba's valuations and the stock traded at depressed single-digit price-earnings (P/E) multiples. While the valuation multiples expanded as the stock rallied, they have dipped after the recent fall. BABA now trades at a forward P/E multiple of 9.9x, which does not look demanding, especially considering the almost 25% earnings growth the company is expected to post in its fiscal year 2026.
While tariff uncertainty looks here to stay and a U.S.-China trade deal might take longer deals with other countries, eventually, the world's two biggest economies should find a way to address what at best looks like a war of mutual destruction. Overall, I find BABA shares attractive after the crash and added to my positions after having previously booked profits.
Alibaba Stock Forecast
Brokerages are also quite bullish on BABA and of the 20 analysts actively covering the stock, all grant it a 'Strong Buy' rating. Alibaba's mean target price of $149 is 41% higher than current prices while the Street-high target price of $190 is 81% higher.
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