Investors pondering the fate of Alibaba stock are faced with a conundrum. The company, often hailed as China’s e-commerce giant, has been far from stellar in its performance since 2021. Plagued by regulatory hurdles and economic sluggishness in its primary market, Alibaba’s share price has languished near multiyear lows.

Yet, could it be that many investors are fixated on Alibaba’s past misfortunes and failing to recognize the brighter prospects on the horizon? If so, does this signal a prime buying opportunity for Alibaba stock?

A Tapestry of Challenges for Alibaba

If you’re acquainted with the company, you’ll know Alibaba oversees prominent e-commerce platforms like Taobao and Tmall in China, in addition to operating Cainiao logistics and a cloud computing segment. However, trouble began brewing in 2021. Beneath the surface, Beijing’s regulatory pressures mounted, exacerbated by the tough act of following the surge in online shopping witnessed in 2020.

Moreover, China’s prolonged COVID-19 lockdowns wreaked havoc on the economy, marking its weakest growth in years with a meager 5.2% GDP expansion in 2022.

It’s essential to acknowledge that since founder Jack Ma’s departure as chairman in 2019, Alibaba grappled with an identity crisis, making significant management shuffles and scrapping plans for major spin-offs, like the recent decision in March to retain its logistics arm and fortify its e-commerce operations.

While these strategic shifts may bode well in the long run, the ongoing indecisiveness raises doubts among investors.

Nonetheless, both the company and the economic landscape it navigates appear to have finally made a turn for the better. With a valuation of under 10 times its trailing and projected earnings per share, Alibaba’s struggling stock may soon mirror this upward trajectory.

A Promising Alibaba and the Dawn of a New Era

Make no mistake; there are risks lurking in the shadows. Yet, the underestimated potential for reward stems from two significant factors.

Firstly, China’s present and anticipated economic growth casts a brighter light. Though marginally slower than the preceding year, the International Monetary Fund upgraded China’s full-year growth outlook from 4.6% to a robust 5%. Notably, the nation’s consumer spending has seen consistent year-over-year growth since January 2023.

Seizing this favorable wind, Alibaba now rests in the hands of a leadership team set on defining its future. CEO Eddie Wu, assuming the mantle in September, alongside Chairman Joe Tsai, aims to channel significant investments into core business segments like cloud computing and e-commerce, fostering technological innovation.

Scrutinize the signs. This marks the company and leadership ensemble that astute observers have eagerly awaited. Wu’s choice to retain the logistics arm poses challenges but promises substantial returns if it enhances the marketability of Tmall and Taobao. By preserving its cloud computing division, Alibaba anticipates reaping the rewards of the booming artificial intelligence industry.

Foraging the Path Forward

The irony lies in the stock’s underperformance chiefly due to the disparity between investor perceptions and analysts’ expectations. Projections of robust revenue growth through 2026, coupled with soaring earnings per share, outline a promising narrative.

Data source: StockAnalysis.com. Chart by author. Figures are in Chinese yuan.

Analysts unanimously assert that the American depository receipt (ADR) version of Alibaba’s stock holds a 40% upside potential over the current price tag. The stock’s trading at less than 10 times its projected 2024 earnings, feeding into this undervaluation.

So, why then does the stock struggle to gain footing?

As previously mentioned, this scenario paints a common picture where investor skepticism overshadows a company’s potential to overcome challenges. Alibaba appears poised to do just that, albeit requiring a few more quarters of success to rekindle investor confidence. Once the tide turns, expect remarkable and sustained growth to ensue.

Consider this: Billionaire investor David Tepper’s Appaloosa Management upped its stake in Alibaba by 6.9 million shares in the first quarter, catapulting it to the fund’s top holding. Surely, Tepper saw or knows something overlooked by the masses about Alibaba’s current stance.

Unravel the connections. Indeed, Alibaba