Alibaba's performance is impressive, and both special dividends and share repurchases are on the way! Can the stock price reach a new high?

Alibaba Group Holdings announced good results for the previous fiscal year and announced a special dividend, enhancing its value proposition.

The company's sales growth is stronger, and it is increasing its share buyback efforts, making it more attractive to investors.

Alibaba's cloud computing business is performing well. The company is investing in artificial intelligence products and is expected to achieve long-term growth.

Alibaba Group Holdings Ltd. (NYSE: BABA) shares rose in April and May, thanks to the e-commerce giant reporting healthy results for the last fiscal year. Alibaba also announced a special dividend of $0.0825 per common share, further strengthening its value proposition.

The e-commerce company's sales growth is also stronger, and the company is ramping up share buybacks, which may make Alibaba more attractive to investors. I think Alibaba's current consolidation provides a buying opportunity for long-term investors interested in investing in growing e-commerce companies.

I rate Alibaba's stock as a buy. What supports my investment thesis is that as a leading e-commerce platform, it is expected to benefit from an improved consumer environment. Additionally, as Alibaba announced a special dividend and increased share buybacks, the company became more attractive to investors seeking a higher return on capital.

Alibaba benefited from a rebound in sales growth last quarter. The e-commerce giant's total division revenue increased 7% year over year to reach $30.729 billion, compared to a 5% year over year increase in the previous quarter. This stronger sales growth was driven by market wholesale, international trade, and logistics.

Furthermore, Alibaba's cloud computer business is particularly attractive to investors, mainly because they can buy Alibaba's cloud business at a more attractive valuation than Amazon Inc.

Alibaba's cloud business is performing well, especially in terms of profit. The cloud computing division provides Alibaba's customers with core services such as computing, storage, databases, and networking. Due to increased adoption, its profit increased 45% year over year to US$198 million. From an operating income perspective, cloud computing was the fastest-growing sector in the last fiscal quarter.

The increase in profits also reflects Alibaba's priority investment in cloud infrastructure and active stock buybacks. Alibaba Cloud and continued share buyback potential are two aspects that I think reinforce the company's value proposition.

Moreover, Alibaba is actively investing in its artificial intelligence products, such as machine learning, data intelligence, and analytics, which provides the company with long-term growth potential.

Alibaba has also become active in share buybacks, a smart way to allocate capital, mainly because the e-commerce company's shares are very cheap (with an expected price-earnings ratio of 9.0 times). In the previous quarter alone, the first quarter of 2024, Alibaba bought back $4.8 billion of shares on the market. The total amount of repurchases over the past year reached $12.5 billion, equivalent to 5.1% of the company's issued shares. Compared to last year, Alibaba's share repurchases increased 15%. This increase in share buybacks is part of Alibaba's plan to repurchase $25 billion worth of shares by March 2027.

In addition to providing shareholders with these impressive cash returns, Alibaba also announced a special dividend of $0.66 per share. The registration date for this one-time dividend is June 13, 2024. Therefore, investors interested in receiving this special dividend can still buy the stock within the next two weeks. Specifically, they can use BiyaPay to search the Alibaba stock code and directly trade in real-time online. They can also use the platform as a professional deposit and withdrawal tool for US and Hong Kong stocks, recharge the digital currency into US or Hong Kong dollars, withdraw to bank accounts, and then deposit funds to other brokerage firms to invest in stocks. The payment speed is fast and there is no limit.

Alibaba made a major breakthrough in April and continued until May 2024. The stock broke above the 50-day and 200-day moving averages amid increasing trading volume, which is a very bullish sign. Although the stock recently lost some upward momentum, the 200-day moving average has yet to be broken, which helps to solidify the bullish chart.

I think this pullback is a good opportunity for investors to buy Alibaba Group holding shares, especially as the business gained some much-needed momentum last quarter.

Alibaba has a unique opportunity to unlock value for shareholders: it is preparing to spend $25 billion to buy its heavily discounted shares. The company's stock is currently selling at 9.1 times the expected price-earnings ratio. The expected year-on-year profit growth rate is 13%, which is reasonable for me considering the e-commerce business is recovering and cloud computing profits are soaring. In my opinion, Alibaba's e-commerce recovery, cloud computing profit growth, special dividends, and strong buybacks may drive the stock to re-rate.

I think Alibaba's valuation may be readjusted to $114-$124 over the next 12 months, which will reflect a price-earnings ratio of 12-13 times. In my opinion, this price-earnings ratio will more accurately reflect Alibaba's progress in cloud computing and e-commerce, while also taking into account that the company will bring rich cash returns to shareholders over the next three years.

Other e-commerce companies, such as Pinduoduo (PDD), have an expected price-earnings ratio of 11.0 times, while the price-earnings ratio of JD (JD) is 8.3 times. Although e-commerce companies are generally cheap, I prefer Alibaba because it has a cloud business related to the AI theme, and if the company can maintain its profitable momentum, this business could grow into a real gem over time.

Alibaba will have to invest a lot of money in artificial intelligence products because apparently the market is moving in this direction. Alibaba has numerous data-gathering e-commerce brands and cloud services, both of which will use artificial intelligence to improve its product offerings and create added value for the company.

As a result, Alibaba is likely to increase its spending on artificial intelligence products and services, which could cut the company's short-term profitability. But in the long run, I expect Alibaba's investment in artificial intelligence to pay off handsomely, especially in the cloud computing sector, where artificial intelligence can play an important role in cloud-enabled business intelligence and data analysis.

Alibaba's stock had good breakthroughs in April and May, but is now somewhat exhausted, which may provide a buying opportunity for investors who missed out on the initial rise.

Alibaba's increased sales growth in the last quarter, increased share buybacks, and announced a special dividend, all of which have fundamentally boosted the current value proposition of Alibaba Group Holdings.

The company bought back nearly $5 billion of shares in the last quarter, and profits from the cloud computing business are soaring. I think it's widely undervalued as a growth investment, and its risk-reward relationship is still very attractive.