Alibaba’s Resilience Amid U.S. Tariff Concerns Shows Investment Potential

Stocks tumbled significantly on Thursday as the U.S. officially implemented higher-than-expected tariffs on imports. The news has sparked concerns about inflationary pressures and elevated input costs impacting numerous businesses and consumers. Nevertheless, certain stocks are poised to outperform during this turbulent period, and Alibaba stands out among them.

Alibaba (NYSE: BABA) experienced a decline alongside many market players at Thursday’s opening bell. This reaction makes some sense, given Alibaba’s status as a prominent e-commerce platform in China and a major target in the ongoing trade conflict. If you’ve shopped on Chinese sites with remarkably low prices, you’re likely familiar with Temu, Shein, and Alibaba’s own AliExpress.

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However, the reality is more favorable than the immediate market reaction suggests. Let’s explore why Alibaba could be a compelling buy after the recent price pullback linked to tariffs.

Positive Trends Amidst Tariff Concerns

Surprisingly, Alibaba has been one of the strongest performers this year. Just nine stocks trading on U.S. exchanges, each with market caps exceeding $10 billion, have surged at least 50% in 2025. Alibaba leads this group as the most valuable public company, boasting a market cap of $310 billion.

The stock’s impressive 56% growth in the year’s first three months comes in the face of escalating tensions with China. While both Presidents Donald Trump and Joe Biden have targeted China under their administrations, Alibaba managed to provide double-digit returns to its investors in 2024.

Despite this success, Alibaba’s shares remain approximately 60% below their all-time high from late 2020. The positive trading momentum over the last year indicates that Alibaba is adapting well to today’s challenging economic landscape.

Understanding Alibaba’s Business Dynamics

How can Alibaba maintain its position despite tariff impacts on AliExpress? In recent years, Alibaba has expanded its global reach significantly, with international sales growing faster than domestic growth. Nonetheless, over 85% of its revenue still originates from China, contributing more than 100% of the company’s overall profitability.

In its latest quarter, Alibaba’s international e-commerce business generated $5.2 billion in sales, or 13% of the $38.2 billion total revenue. However, this segment recorded negative adjusted earnings before interest, taxes, and amortization. While it grew 32% year-over-year, it remains a drag on overall profitability.

Image source: Getty Images.

Potential for Growth Beyond the U.S.

Over the past 15 years, Alibaba’s business has increased remarkably, but recent growth has slowed. The company has only registered one quarter of double-digit revenue growth during the past three years.

Although AliExpress may face challenges from American shoppers, this segment is only a small portion of Alibaba’s extensive operations, which also serve customers in Europe, Asia, and beyond. Given the new trade tensions, while U.S. consumers may shift, other markets will likely continue as usual. This situation may even strengthen Alibaba’s international trade channels and could stop the international operations from weighing on profitability.

The e-commerce giant behind Taobao, Tmall, and a rapidly growing cloud intelligence business will continue to strive for growth. Meanwhile, its current stock valuation appears relatively attractive, particularly after nearly doubling since January 2024.

Trading at around 14 times this year’s adjusted earnings and less than 13 times next year’s forecast, Alibaba’s multiples remain low for a leading company with consistent revenue growth for 25 years. It should perform better than its U.S. counterparts during upcoming economic fluctuations.

Is Now the Right Time to Invest in Alibaba?

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Rick Munarriz has positions in Alibaba Group. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.