The Zacks Analyst Blog Highlights Alibaba Group and Baidu

For Immediate ReleaseChicago, IL – June 6, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Alibaba Group BABA and Baidu BIDU.Here are highlights from Thursday’s Analyst Blog:BABA vs. BIDU: Which Chinese Internet Stock Is a Better Buy?China's Internet giants have endured a challenging few years marked by regulatory crackdowns, economic headwinds, and intensifying competition. However, as the sector stabilizes and AI emerges as the next growth frontier, two prominent players — Alibaba Group and Baidu — are positioning themselves for the next phase of expansion.Both companies represent different facets of China's digital economy. Alibaba built its empire on e-commerce and cloud services, while Baidu established dominance in search and is now pivoting heavily toward AI and autonomous driving. Despite their different origins, both are now racing to capitalize on generative AI opportunities, making direct comparison increasingly relevant.As investors seek exposure to China's tech recovery and AI transformation, these two stocks present compelling yet contrasting investment propositions. Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.The Case for BABA StockAlibaba demonstrates remarkable resilience and diversification that positions it favorably for sustained growth. The company's first-quarter 2025 results showcase this strength, with total revenues reaching RMB236.4 billion, representing solid 7% year-over-year growth despite macroeconomic challenges. More importantly, the company's Cloud Intelligence Group accelerated to 18% growth, while AI-related product revenues maintained triple-digit expansion for the seventh consecutive quarter.The e-commerce giant's ecosystem approach provides multiple revenue streams and cross-selling opportunities. Customer management revenues at Taobao and Tmall grew 12% year over year, reflecting improved monetization and merchant engagement. This diversification reduces dependency on any single business line and creates natural hedges against market volatility.Alibaba's AI leadership, through its Qwen large language model ecosystem, is gaining significant traction. The recent strategic partnership with SAP, which will integrate Qwen into SAP's Generative AI Hub, demonstrates the commercial viability and enterprise adoption of Alibaba's AI technologies. This partnership expands Alibaba's reach into enterprise solutions across China, Southeast Asia, the Middle East, and Africa.Financial strength remains a cornerstone advantage. With RMB597.1 billion in cash and equivalents, Alibaba maintains exceptional liquidity for investments and shareholder returns. The company repurchased $11.9 billion in shares during fiscal 2025, achieving a 5.1% net reduction in outstanding shares, while also approving $4.6 billion in dividends. This capital allocation strategy demonstrates management's confidence in long-term value creation and commitment to rewarding shareholders during the recovery phase.The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $10.62 per share, indicating a 17.87% year-over-year increase.Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited QuoteSee the Zacks Earnings Calendar to stay ahead of market-making news.The Case for BIDU StockBaidu faces significant structural challenges that raise concerns about its long-term competitive positioning and growth prospects. The company's first-quarter 2025 revenue growth of just 3.22% year over year to RMB32.5 billion substantially lags both market expectations and peer performance, highlighting the underlying weakness in its core search business.The fundamental problem lies in Baidu's heavy dependence on search advertising, which faces secular decline as user behavior shifts toward social media, short-video platforms, and AI-powered alternatives. While Baidu is investing heavily in AI transformation of its search platform, with 35% of mobile search results now containing AI-generated content, this transition is cannibalizing traditional advertising revenues without generating sufficient replacement income.Baidu's AI Cloud business, though growing at 42% year over year, operates at a much smaller scale compared to Alibaba, generating only RMB6.7 billion in quarterly revenues. This revenue base is insufficient to offset declining search revenues and requires continued heavy investment that pressures profitability. The company's AI initiatives, while technologically impressive, have yet to demonstrate sustainable monetization models at scale.The autonomous driving venture Apollo Go, despite expanding internationally to Dubai and Abu Dhabi, remains in early commercialization stages with unclear path to profitability. With only 1.4 million rides provided in first-quarter 2025, the business operates at minimal scale relative to traditional ride-hailing competitors. The capital intensity required for autonomous vehicle deployment and regulatory uncertainties across markets create significant execution risks that could drain resources without generating adequate returns for shareholders.The consensus mark for 2025 earnings is pegged at $9.43 per share, indicating a 10.45% year-over-year decline.Baidu, Inc. price-consensus-chart | Baidu, Inc. QuoteStock Valuation and Price Performance ComparisonBoth Alibaba and Baidu trade at significant discounts to their historical valuations and international peers, reflecting persistent investor concerns about Chinese tech regulations and economic growth. However, Alibaba's P/E ratio of 10.98x appears more compelling given its superior financial metrics and diversified revenue streams as compared to BIDUs’ P/E ratio of 8.51x.Alibaba's recent price performance reflects investor confidence, with shares climbing 41.2% year to date, outperforming Baidu, which inched up 0.9%. Alibaba's consistent profitability across multiple business segments provides greater earnings stability compared to Baidu's volatile performance tied to advertising cycles and heavy AI investments.ConclusionAlibaba emerges as the superior investment choice based on fundamental business strength, diversification, and financial positioning. The company's ecosystem approach provides multiple growth drivers and revenue stability, while its AI leadership through Qwen demonstrates real commercial traction. Superior cash generation enables aggressive shareholder returns and strategic investments without compromising financial flexibility.Baidu's structural challenges in search, smaller AI cloud scale, and uncertain autonomous driving timeline create execution risks that outweigh potential upside. Investors should consider accumulating Alibaba shares on market weakness while avoiding or reducing Baidu exposure until clearer monetization paths emerge. BABA currently carries a Zacks Rank #3 (Hold), whereas BIDU has a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Zacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Baidu, Inc. (BIDU): Free Stock Analysis Report Alibaba Group Holding Limited (BABA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks