Alibaba: Cloud AI Is On Rocket Fuel, But I Downgrade Ahead Of Q2 Earnings Deep Value Investing 9. 61K Follower s Comments Summary I downgrade Alibaba Group Holding Limited from Strong Buy to a more cautious stance, as I believe an EPS miss in Q2 is likely due to the heavy investments in e-commerce. China e-commerce profitability is under pressure, with Q1 FY26 adjusted EBITDA down 14% overall and 21% for the segment, while loss-making quick commerce coincides with two straight EPS misses. My thesis leans on Cloud Intelligence growth, with Q1 reaccelerating to 26% YOY, AI products posting eight triple-digit quarters and contributing over 20% of external cloud revenue. I see a mixed valuation: BABA trades at 23x next year’s earnings, cheaper than U. S. hyperscalers but more expensive than Tencent and Baidu, leaving shares priced for perfection. Looking ahead, I remain cautiously optimistic on sustained cloud acceleration, e-commerce EBITDA improvement, and quick commerce’s RMB 1T GMV target within three years. In my last coverage on Alibaba Group Holding Limited (BABA), I rated the stock as a Strong Buy on the expectation of growth in the cloud segment. At the time, I wrote that “I reiterate my This article was written by 9. 61K Follower s Small deep value individual investor, with a modest private investment portfolio, split approx. 50%-50% between shares and call options. I have a B. Sc. in aeronautical engineering and over 6 years of experience as an engineering consultant in the aerospace sector. The latter statement is not relevant in any way whatsoever to my investment style, but I thought to add it for self-indulgent purposes. I have a contrarian investment style, highly risky, and often dealing with illiquid options. How illiquid? Well, you can land a Jumbo on the spread and still have clearance for take-off. From time to time, I buy shares, mostly to not be categorized as a degen by my fellow investor friends, therefore the 50%-50% allocation. My timeframe tends to be between 3-24 months. I like stocks that have experienced a recent sell-off due to non-recurrent events, particularly when insiders are buying shares at the new lower price. This is how I often screen through thousands of stocks, mainly in the US, although I may own shares in banana republics. I use fundamental analysis to check the health of companies that pass through my screening process, their leverage, and then compare their financial ratios with the sector, and industry median and average. I also do professional background checks of each insider who purchased shares after the recent sell-off. I use technical analysis to optimize the entry and exit points of my positions. I mainly use multicolor lines for support and resistance levels on weekly charts. From time to time I draw trend lines, taken for granted, in multicolor patterns. Note: I tried to keep my introduction as real, and authentic as possible. I dislike empty suits, high-level BS, deep-level BS, unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority. Thanks for reading my introduction! Analyst’s Disclosure: I/we have a beneficial long position in the shares of SOXL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Comments Recommended For You.
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