Morgan Stanley lowers Alibaba's target price to 210 yuan, maintains "Overweight" rating

JP Morgan published a research report, expecting Alibaba-W (09988.HK) to face short-term profit pressure for the third fiscal quarter ending in December last year, but believes that the accelerated growth of AI-driven cloud business will support future valuation reassessment. The bank lowered its target price for Alibaba (BABA.US) in the US stock market from $230 to $215, and its target price for the Hong Kong stock from HKD 225 to HKD 210, while maintaining an "Overweight" rating.

JP Morgan suggests that investors consider gradually accumulating shares of Alibaba, holding a constructive view on its trading over the next 6 to 12 months. The bank explained that although the company may face some pressure on profit margins in the short term due to ongoing investments in food delivery, fast e-commerce, and user expansion for generative AI applications, coupled with a weak macroeconomic environment limiting the growth of its core domestic e-commerce business; however, these negative factors have gradually been digested by the market, and the pace and scale of related investments are largely still under the company's control, representing manageable strategic inputs.

The bank expects that as generative AI workloads expand from pilot projects to broader deployments, Alibaba Cloud's revenue growth will continue to accelerate in the coming quarters, providing substantial evidence of Alibaba's ability to capture and realize AI-driven demand in China. The bank believes that the sustained growth momentum of the cloud business over several quarters should shift investors' focus from short-term expenditures to the durability of higher-quality growth engines, thereby supporting the expansion of valuation multiples