ZACKS·2025-10-14 16:11Core Insights - Alibaba's aggressive investment in quick commerce is showing promising results, with a 12% year-over-year revenue growth in the first quarter of fiscal 2026, driven by Taobao Instant Commerce [1][9] - The platform has significantly increased user engagement, achieving over 80 million average daily orders and nearly 300 million monthly active consumers, contributing to a 25% rise in Taobao's MAUs [1][9] - However, this expansion has negatively impacted profitability, with adjusted EBITDA declining by 14% year-over-year and free cash flow turning negative due to high capital demands [2][9] Financial Performance - The quick commerce segment's revenue growth is supported by a large addressable market of 30 trillion RMB, with consensus estimates predicting 5% revenue growth in fiscal 2026 and 12% in fiscal 2027 [4] - BABA shares have increased by 96.7% year-to-date, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector, which grew by 5.1% and 3.3%, respectively [7] Competitive Landscape - JD.com is a key competitor, rapidly expanding its JD NOW service and ensuring faster fulfillment through its advanced logistics network, although this could pressure its margins due to heavy investments [5] - PDD Holdings is emerging as a strong challenger with its asset-light model, focusing on affordability and social commerce, which poses a strategic threat to Alibaba's capital-intensive approach [6] Valuation Metrics - Alibaba's stock is currently trading at a forward 12-month Price/Earnings ratio of 18.11X, compared to the industry's 23.14X, indicating a relative undervaluation [10] - The Zacks Consensus Estimate for fiscal 2026 earnings is $6.97 per share, reflecting a 22.64% year-over-year decline [13]