Following Donald Trump’s recent presidential victory, global markets have reacted swiftly, and stocks closely linked to U.S.-China relations have seen immediate impacts. While U.S. markets surged, Chinese stocks, particularly Alibaba Group (NYSE:BABA), faced downward pressure as investors brace for potential trade tensions. Amid these developments, the question remains: Can Alibaba stock regain momentum in 2025?
Impact of Trump’s Policies on Alibaba and Chinese Stocks
Trump’s win has renewed concerns over tariffs and trade restrictions. In the aftermath of the election, Alibaba shares dropped over 2%, extending losses from October. As Trump has consistently called for increasing tariffs on Chinese imports, markets are preparing for stricter trade policies, which could present challenges for Alibaba.
Nevertheless, China is countering with stimulus measures aimed at stabilizing its economy. Recent government spending packages, paired with monetary easing, are expected to drive growth, potentially creating an environment for Alibaba to recover. Analysts suggest that the timing of China’s fiscal expansion aligns with U.S. election results to mitigate potential economic fallout and promote domestic demand.
Chinese Stimulus Measures: A Lifeline for Alibaba?
Chinese stocks rallied last month, buoyed by Beijing’s aggressive fiscal and monetary stimulus aimed at stimulating the economy. For Alibaba, a key player in China’s tech and e-commerce sectors, these measures could provide much-needed support. With new spending initiatives expected to enhance consumer purchasing power, Alibaba could benefit from increased transaction volumes across its platforms.
Additionally, China’s economic agenda includes encouraging real estate purchases and boosting infrastructure projects. These policies are designed to spur economic recovery, and companies with strong market shares in e-commerce and cloud computing, such as Alibaba, may see their growth potential revitalized.
Trade Relations Outlook: Will Trump and Xi Reach Common Ground?
A major factor in Alibaba’s stock forecast will be the direction of U.S.-China trade relations. During his first term, Trump implemented tariffs on various Chinese goods, creating friction with China. However, given China’s current economic conditions, there is potential for President Xi Jinping to adopt a more conciliatory approach toward trade, aiming to stabilize the relationship with the U.S.
Chinese leadership has shown recent signs of pragmatism, including easing domestic regulations on major tech firms and opening the real estate market to stimulate growth. If Trump’s administration and China can find middle ground, Alibaba stands to benefit from reduced tariffs and improved access to U.S. markets. However, any escalation in tariffs could weigh heavily on Alibaba’s earnings potential and valuation.
Alibaba’s Valuation and Growth Potential
Despite recent challenges, Alibaba remains an attractive option due to its undervalued position. With a next 12-month price-to-earnings ratio of approximately 10.7x, Alibaba is considerably cheaper than U.S. tech peers like Amazon (NASDAQ:AMZN), which trades at a much higher multiple. Analysts project that Alibaba’s revenue growth and cost-cutting initiatives could lead to a valuation rerating in the future.
Furthermore, Alibaba has explored opportunities to unlock shareholder value by listing its business units individually. Although the company paused its cloud division’s listing plans due to U.S. chip export restrictions, any easing of these limitations would allow Alibaba to advance its restructuring efforts, potentially boosting its stock price.
Alibaba Stock Forecast: A Long-Term Perspective
With a “Strong Buy” consensus among analysts and a mean target price 25% above its current level, Alibaba is seen as a compelling investment. The potential for renewed trade talks under Trump, alongside China’s ongoing economic stimulus, could create a favorable environment for Alibaba’s rebound. However, given Trump’s unpredictable stance on China, BABA investors should brace for possible volatility.
In the best-case scenario, a U.S.-China trade agreement combined with China’s robust economic stimulus could fuel Alibaba’s growth and help it regain lost ground. Conversely, if trade tensions escalate, Alibaba may struggle to overcome external pressures despite the positive impact of domestic stimulus.
Investors with a high tolerance for risk may find Alibaba an appealing opportunity, as the e-commerce giant remains positioned for long-term growth. However, any investment in Alibaba stock should account for the potential market swings that are likely to accompany Trump’s new term.
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