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Alibaba Group Holding Limited (BABA) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Alibaba Group Holding Limited (BABA)

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Intrinsic Value (DCF)

Current$170.93
→
Intrinsic$787.31
+361%
$518.63$787.31$1,321.83
Market implies 1% growth for 5 years
DCF analysis suggests BABA could have 361% upside at 14% growth — verify assumptions match your view.
At $171, the market prices in only 1% growth — below historical 14%, suggesting low expectations.
Range: Bear $519 → Bull $1322. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →10%12%14%16%
8%$984$1072$1167$1268
10%$665$724$787$855
12%$497$541$587$636
14%$394$427$463$502

Bull Case

  • Bull case ($1322) offers 673% upside at 17% growth, 8% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (1%) ≤ historical CAGR (14%)

Bear Case

  • Bear case ($519) with 11% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$88.66B
Year 2$101.38B
Year 3$115.92B
Year 4$132.55B
Year 5$151.56B
Terminal$2.40T

📐 Model Inputs

Growth Rate14.3%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$77.54BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is BABA stock undervalued or overvalued?
🟢 UNDERVALUED

BABA trades at $170.93 vs. our DCF-derived intrinsic value of $787.31, implying +300% upside. At a 9.5% WACC and 14.3% projected FCF growth, the market appears to be underpricing the present value of BABA's future cash flows. The bear case ($521.47) still suggests upside, providing margin of safety.

What is BABA's intrinsic value?

Using a 5-year DCF model: Base FCF of $77.54B, projected at 14.3% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $66.76B net debt and dividing by 2.41B shares: Bear $521.47 | Base $787.31 | Bull $1175.03. Current price $170.93 implies +300% to base case.

How is BABA's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 14.3% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($1967.91B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 25.4x.