BABA (Alibaba): A Deeply Undervalued Chinese Tech Conglomerate

2026-07-01 · Read on Substack →

Core Thesis

Alibaba Group is a Chinese multinational technology conglomerate spanning e-commerce (Taobao, Tmall), cloud computing (AliCloud), digital payments (Alipay), logistics (Cainiao), and international commerce (AliExpress, Lazada, Trendyol).

Alibaba trades at ~6x EV/EBITA with ~$45B net cash.

Key number: $15-18B annual FCF against ~$155B EV = ~10% FCF yield.

The Buffett Lens: Moat + FCF Analysis

Moat Assessment

Two-sided network effects: Taobao + Tmall connect 1B+ consumers with 10M+ merchants.

Scale cost advantage: $50B+ infrastructure impossible to replicate.

BUT — the moat is narrower. PDD C2M and Douyin live commerce bypass Alibaba's middleman.

FCF Quality

FY2026: $10.6B OCF, $8.1B FCF = 5.2% yield. Normalized ~$12-15B = 7.7-9.7% yield.

Verdict: Passes but not with flying colors.

FY2026 Financials

• Revenue: CNY 1,023.7B ($148.4B), +2.7%

• Net Income: CNY 103.6B ($14.4B), -20.4%

• Operating Income: CNY 50.2B (incl CNY 11.2B impairment)

• Cash + Investments: CNY 286.8B (~$39.8B)

• Buybacks: CNY 7.6B (~$1.1B), Dividends: CNY 33.7B (~$4.7B)

Thesis Comparison: Buffett vs. Li Lu

Buffett: Moat real but narrowing → BUY at this price (7/10)

Li Lu: Only $1.1B buyback at multi-year lows? Red flag. Why $4.7B dividends vs buybacks? Corporate structure creates structural discount.

Resolution: Watch August 2026 earnings for accelerated buyback.

Valuation

$120-$280/ADS. Base $180. Annualized return ~9-11% from buybacks + growth.

Bottom Line

At 6x EV/EBITA with $45B net cash: 3-5x upside vs 15-20% downside. Well protected.

Source: Moatery thesis DB (ID: 41032fb4).