Shares of the Chinese technology company Alibaba (BABA) have increased 34.1% year-to-date. Despite this notable gain, BABA stock still appears significantly undervalued and may have plenty of room to run. With a blend of strong fundamentals, growth in its core businesses, and favorable valuation metrics, Alibaba could offer a compelling upside in the months ahead.

At its current level, Alibaba trades at a forward price-earnings (P/E) ratio of 12.2x, which appears low considering the expected 19.5% growth in its earnings per share (EPS) in fiscal 2026. BABA stock’s price-sales (P/S) multiple stands at only 2.09x, which is hard to overlook given the company’s solid performance in its e-commerce platforms and fast-growing AI-powered cloud services. For context, Amazon trades at a P/E of 34.5x and a P/S of 3.55x, suggesting Alibaba is undervalued by comparison.

While Alibaba stock appears undervalued, Alibaba’s growth engine is revving up. Demand for artificial intelligence (AI) technologies continues to drive momentum in its cloud division. At the same time, its e-commerce platforms benefit from ongoing investments aimed at improving user experience and driving better monetization. These efforts are starting to pay off, helping to reignite top-line growth. Moreover, the stock carries a Street-high price target of $180, signaling potential 60% upside from current levels.

Strong Performance Across Alibaba’s Core Businesses

The company’s most recent quarterly results provide a strong indication that its investments in core businesses are yielding positive returns. Alibaba’s core e-commerce platforms, Taobao and Tmall, delivered double-digit growth in customer management revenue (CMR), rising 12% year over year. This growth was primarily driven by an improved take rate, which reflects the percentage of revenue that Alibaba earns from merchants. That improvement stemmed in part from software service fees and deeper adoption of Quanzhantui, a tool that makes marketing more efficient and accessible for merchants on the platform.

Meanwhile, Alibaba’s cloud business continues to gain traction. Revenue growth in this segment accelerated to 18%, bolstered by surging demand for public cloud services. This ongoing strength reflects the company’s expanding footprint in cloud computing, driven by its AI initiatives.

Alibaba's AI momentum remains solid. Revenue from AI-related products has posted triple-digit growth for the seventh consecutive quarter, with adoption expanding across a range of industries. From digital-native sectors to more traditional verticals like manufacturing, companies are turning to Alibaba’s AI tools to streamline operations and drive innovation. This broad uptake reflects Alibaba’s strategic focus on technology and cements its leadership position in China’s cloud and AI ecosystem.

Beyond its domestic market, Alibaba’s international business is also delivering strong results. AIDC, its international digital commerce arm, continues to show rapid growth thanks in part to the strength of cross-border commerce. The company is working to tailor product offerings and business models to local market demands, emphasizing local supply and operational efficiency amid a challenging macro and geopolitical environment.

Importantly, Alibaba’s disciplined approach to managing costs and enhancing productivity is producing tangible results. Each segment of the business posted year-over-year EBITA gains in the recent quarter, helping lift group-level EBITA by 36%. Several previously loss-making operations are on track to break even, even as Alibaba continues to invest in targeted, AI-focused initiatives with long-term potential.

Alibaba is also taking steps to streamline its business portfolio. It expects to generate as much as $2.6 billion from the sale of non-core assets. These divestitures will free up capital for reinvestment in growth areas and pave the way for potential shareholder returns.

Analysts are Bullish on BABA Stock

Looking ahead, Alibaba is doubling down on user experience improvements, from competitive pricing and enhanced customer service to loyalty programs and cutting-edge AI features. These initiatives are expected to drive further consumer growth and boost order volume.

At the same time, Alibaba’s Cloud Intelligence business will likely maintain its upward trajectory, driven by the continued rollout and adoption of AI products across diverse sectors.

Wall Street remains upbeat about Alibaba. Analysts have a consensus “Strong Buy” rating on BABA stock. Moreover, their average price target of $159.55 and the Street-high price target of $180 imply significant upside potential from current levels.

Conclusion

In short, while Alibaba stock may have already made notable gains this year, it still looks like a compelling investment. With strong fundamentals, accelerating growth in key areas, and a relatively low valuation, the company appears well-positioned to reward investors over the coming year and potentially hit the $180 mark sooner than many expect.