BABA intrinsic value must be adjusted downward; the company has failed to deliver growth over 6 years and remains a retailer, making current valuation unjustified by AI promises.

Alibaba reported earnings. It's the stock reacted. It goes up and down a lot in the last year or two, but we have to see how is the intrinsic value, how to adjust that, the P ratio, what is the risk and reward of investing.

They have announced 10 billion [snorts] dollars issuance of shares. Earnings, if we look at earnings, if you say, "Okay, 9% growth, e-commerce 4% growth, cloud 45% growth, AI 16% growth."

Then I look a little bit at the cash flows. 3 billion from operating activities, 9 billion CAPEX leading to 6 and 1/2 billion negative. Cut the share repurchases. The cash that was 60 billion a while ago is going down to 30 billion.

Repurchases cut. Huge capital expenditures to grow into AI.

I look a little bit at revenue, some specific situations there, but what I'm interested is this, and we'll catch on this later. International e-commerce 1% growth, which is nothing compared to what was promised in the past.

Then I look a little bit further. It's all about cloud compute services targeting doubling in a few years. I can give you that. AI, okay. Then I get to my value investing situation.

I look at the earnings, earnings per share going down compared to the past on the high investments.

And now the question is, "Then, what to use as a valuation input to get intrinsic value of Alibaba?" Well, I looked at the cash for the previous fiscal year, 11 billion provided by operating activities, 17 billion dollars spent.

That means negative cash flows. Okay, this is mostly for growth, but I have to adjust it a little bit to the current situation.

It was still stable, not much difference there in the cash flows in the this quarter and the first quarter of 2025, but I'm looking at this net income to shareholders fiscal 2026, sorry, 15 billion.

I'm looking a little bit as what they are burning at the not that great growth and they are burning money. So, I'm thinking about I used to be 20 billion that the e-commerce was creating, then it went to 15.

Now, if I look at what e-commerce is creating with the investments, we are at 10. And then they are spending more at those AI things. So, I have to adjust things a little bit.

10 billion creation, value creation in cash, market cap 283, that's a big P ratio. That's 3.5% of the market capitalization. That means that earnings per share are four, let's say some kind of owner's earnings.

I look a little bit at total equity, 163 billion compared to the market cap. It's not the 200 billion we bought big a few years ago and then it was all about buybacks and dividends, not AI.

Another situation is that Alibaba hasn't delivered in the last 6 years.

And that's what Charlie Munger said, it's still a god damn retailer. Because I looked at the investor day 2021, 2 billion consumers, huge growth there, user growth plus share of wallet expansion, value creation, international was big discussions there.

What do we have now? Now, we have highly confident that cloud AI will grow. Promises of growth, deep chips, even semiconductors now. That's Alibaba completely shifting to what they were promising a few years ago, but it's still promises.

I don't want to pay for promises in that situation.

Therefore, I have to revalue Alibaba. And here we have it. Alibaba, I used to have here I think seven earnings per share, but 10% growth rate terminal multiple P ratio and that it was close to intrinsic value.

I'm changing that to four for the situation. Okay, I'm going to leave the growth rate the P ratio and intrinsic value is half of the stock price.

Now, they need to grow really big and higher P ratio to justify this. The margin of safety, perhaps not at 33. I will put try to put it here at 60 would be a margin of safety when they reach again the book value. Therefore, I'll put here 45 45 and 10.

So, we are still far from not that far from let's say something to look at, but it is something that I have to reprice because it is a goddamn retailer. 5 years nothing happened.

Okay, we look for better situations and I'm not going to bet on AI.