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Yahoo
05-06-2025
- Business
- Yahoo
Alibaba vs. Baidu: Which Chinese Internet Stock is a Better Bet?
China's Internet giants have endured a challenging few years marked by regulatory crackdowns, economic headwinds, and intensifying competition. However, as the sector stabilizes and AI emerges as the next growth frontier, two prominent players — Alibaba Group BABA and Baidu BIDU — are positioning themselves for the next phase of companies represent different facets of China's digital economy. Alibaba built its empire on e-commerce and cloud services, while Baidu established dominance in search and is now pivoting heavily toward AI and autonomous driving. Despite their different origins, both are now racing to capitalize on generative AI opportunities, making direct comparison increasingly investors seek exposure to China's tech recovery and AI transformation, these two stocks present compelling yet contrasting investment propositions. Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now. Alibaba demonstrates remarkable resilience and diversification that positions it favorably for sustained growth. The company's first-quarter 2025 results showcase this strength, with total revenues reaching RMB236.4 billion, representing solid 7% year-over-year growth despite macroeconomic challenges. More importantly, the company's Cloud Intelligence Group accelerated to 18% growth, while AI-related product revenues maintained triple-digit expansion for the seventh consecutive e-commerce giant's ecosystem approach provides multiple revenue streams and cross-selling opportunities. Customer management revenues at Taobao and Tmall grew 12% year over year, reflecting improved monetization and merchant engagement. This diversification reduces dependency on any single business line and creates natural hedges against market AI leadership, through its Qwen large language model ecosystem, is gaining significant traction. The recent strategic partnership with SAP, which will integrate Qwen into SAP's Generative AI Hub, demonstrates the commercial viability and enterprise adoption of Alibaba's AI technologies. This partnership expands Alibaba's reach into enterprise solutions across China, Southeast Asia, the Middle East, and strength remains a cornerstone advantage. With RMB597.1 billion in cash and equivalents, Alibaba maintains exceptional liquidity for investments and shareholder returns. The company repurchased $11.9 billion in shares during fiscal 2025, achieving a 5.1% net reduction in outstanding shares, while also approving $4.6 billion in dividends. This capital allocation strategy demonstrates management's confidence in long-term value creation and commitment to rewarding shareholders during the recovery Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $10.62 per share, indicating a 17.87% year-over-year increase. Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote See the Zacks Earnings Calendar to stay ahead of market-making news. Baidu faces significant structural challenges that raise concerns about its long-term competitive positioning and growth prospects. The company's first-quarter 2025 revenue growth of just 3.22% year over year to RMB32.5 billion substantially lags both market expectations and peer performance, highlighting the underlying weakness in its core search fundamental problem lies in Baidu's heavy dependence on search advertising, which faces secular decline as user behavior shifts toward social media, short-video platforms, and AI-powered alternatives. While Baidu is investing heavily in AI transformation of its search platform, with 35% of mobile search results now containing AI-generated content, this transition is cannibalizing traditional advertising revenues without generating sufficient replacement AI Cloud business, though growing at 42% year over year, operates at a much smaller scale compared to Alibaba, generating only RMB6.7 billion in quarterly revenues. This revenue base is insufficient to offset declining search revenues and requires continued heavy investment that pressures profitability. The company's AI initiatives, while technologically impressive, have yet to demonstrate sustainable monetization models at autonomous driving venture Apollo Go, despite expanding internationally to Dubai and Abu Dhabi, remains in early commercialization stages with unclear path to profitability. With only 1.4 million rides provided in first-quarter 2025, the business operates at minimal scale relative to traditional ride-hailing competitors. The capital intensity required for autonomous vehicle deployment and regulatory uncertainties across markets create significant execution risks that could drain resources without generating adequate returns for consensus mark for 2025 earnings is pegged at $9.43 per share, indicating a 10.45% year-over-year decline. Baidu, Inc. price-consensus-chart | Baidu, Inc. Quote Both Alibaba and Baidu trade at significant discounts to their historical valuations and international peers, reflecting persistent investor concerns about Chinese tech regulations and economic growth. However, Alibaba's P/E ratio of 10.98x appears more compelling given its superior financial metrics and diversified revenue streams as compared to BIDUs' P/E ratio of 8.51x. Image Source: Zacks Investment Research Alibaba's recent price performance reflects investor confidence, with shares climbing 41.2% year to date, outperforming Baidu, which inched up 0.9%. Alibaba's consistent profitability across multiple business segments provides greater earnings stability compared to Baidu's volatile performance tied to advertising cycles and heavy AI investments. Image Source: Zacks Investment Research Alibaba emerges as the superior investment choice based on fundamental business strength, diversification, and financial positioning. The company's ecosystem approach provides multiple growth drivers and revenue stability, while its AI leadership through Qwen demonstrates real commercial traction. Superior cash generation enables aggressive shareholder returns and strategic investments without compromising financial flexibility. Baidu's structural challenges in search, smaller AI cloud scale, and uncertain autonomous driving timeline create execution risks that outweigh potential upside. Investors should consider accumulating Alibaba shares on market weakness while avoiding or reducing Baidu exposure until clearer monetization paths emerge. BABA currently carries a Zacks Rank #3 (Hold), whereas BIDU has a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Baidu, Inc. (BIDU) : Free Stock Analysis Report Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
19-05-2025
- Business
- Yahoo
Alibaba (BABA) Shares Tumble 5% as U.S. Probes Apple AI Deal
Alibaba's Hong Kong-listed shares slid about 5% on early Monday trading, leading losses on the Hang Seng China Enterprises Index, after U.S. officials raised alarms over its AI partnership with Apple (NASDAQ:AAPL). The White House is wary that the deal could accelerate China's AI prowess, expose Apple to stricter Chinese data rules and pose national security risks. Warning! GuruFocus has detected 3 Warning Signs with BABA. The setback compounds Alibaba's mixed Q4 fiscal 2025 results. Revenue of RMB236.4 billion ($32.6 billion) fell short of the RMB237.9 billion that analysts expected, while earnings per American Depositary Share came in at $1.73, below forecasts. Investors punished the stock, driving it down more than 8% after the earnings release. Analysts caution that regulatory scrutiny may slow Alibaba's cloud and AI expansion. Bloomberg Intelligence's Catherine Lim warns the U.S. pushback could curb the company's potential cloud-revenue upside. Apple, China's second-largest smartphone vendor, also stands to lose if the tie-up stalls. Its sales in the region slipped 2.3% last quarter amid fierce competition from Huawei and Xiaomi. Union Bancaire Privee's Vey-Sern Ling notes Apple needs a local AI partner to remain competitive in China's fast-evolving market. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
19-05-2025
- Business
- Yahoo
Alibaba (BABA) Shares Tumble 5% as U.S. Probes Apple AI Deal
Alibaba's Hong Kong-listed shares slid about 5% on early Monday trading, leading losses on the Hang Seng China Enterprises Index, after U.S. officials raised alarms over its AI partnership with Apple (NASDAQ:AAPL). The White House is wary that the deal could accelerate China's AI prowess, expose Apple to stricter Chinese data rules and pose national security risks. Warning! GuruFocus has detected 3 Warning Signs with BABA. The setback compounds Alibaba's mixed Q4 fiscal 2025 results. Revenue of RMB236.4 billion ($32.6 billion) fell short of the RMB237.9 billion that analysts expected, while earnings per American Depositary Share came in at $1.73, below forecasts. Investors punished the stock, driving it down more than 8% after the earnings release. Analysts caution that regulatory scrutiny may slow Alibaba's cloud and AI expansion. Bloomberg Intelligence's Catherine Lim warns the U.S. pushback could curb the company's potential cloud-revenue upside. Apple, China's second-largest smartphone vendor, also stands to lose if the tie-up stalls. Its sales in the region slipped 2.3% last quarter amid fierce competition from Huawei and Xiaomi. Union Bancaire Privee's Vey-Sern Ling notes Apple needs a local AI partner to remain competitive in China's fast-evolving market. This article first appeared on GuruFocus.
