Although the investor day following Alibaba's earnings release reinforced its long-term investment narrative, J.P. Morgan believes the company's stock price will remain constrained by the pace of earnings realization in the short term. The firm maintained its 'Overweight' rating on Alibaba's US and Hong Kong-listed shares, with a target price of $205 for the US stock and HK$200 for the Hong Kong stock.
A research report released by J.P. Morgan on March 24 indicated that the meeting helped clarify why management is willing to bear short-term profit pressure and why they believe current investments can generate significant value in the medium term. However, J.P. Morgan is not more convinced that the valuation can be significantly increased in the near future. The firm believes that in the next three months, Alibaba's stock price will mainly consolidate, unless subsequent data more clearly indicates improved business momentum and a manageable investment intensity.
The current market environment tends to reward earnings realization rather than long-term strategic choices. J.P. Morgan stated that the meeting itself is not enough to drive a steep increase in valuation, but the company's long-term value narrative is intact, and the option value embedded in the valuation is being underestimated by the market.
<h2>AI and Cloud Business: Clear Strategic Focus, Monetization Visibility Still Needs Improvement</h2>
Management clearly stated at the meeting that AI and cloud businesses are the top priorities of Alibaba's strategic agenda and the company's most important long-term investment areas. This statement aims to eliminate market doubts about whether spending on local services or flash sales is diverting resources and strategic attention from AI and cloud businesses.
On the monetization front, management indicated that Alibaba has achieved AI demand monetization, but most of it is currently included in broader cloud business revenue and is not yet disclosed as separate AI revenue. Enterprise customers using AI workloads typically use infrastructure, computing power, and related services through standard cloud frameworks. Management expects AI monetization to gradually become more apparent as customer usage increases and pricing models evolve.
J.P. Morgan believes this is the most important message from the meeting. Alibaba's management wants investors to view the cloud business as a broader AI stack, with expanding monetization potential through model services, token consumption, and application-layer usage, rather than merely positioning it as a traditional infrastructure business. While this framework is constructive in the medium term, the market needs clearer evidence, including continued acceleration in the cloud business, increased AI monetization visibility, and confirmation that increased investment will not structurally pressure profit margins beyond expectations, before assigning significantly higher valuation multiples.
<h2>AI Full Value Chain Layout: Open Source for Traffic, Synergistic Monetization within Ecosystem</h2>
Management's positioning of Alibaba's AI role extends beyond the foundational model level. Alibaba believes it is broadly involved in multiple layers including infrastructure, cloud hosting, model platforms, enterprise deployment tools, and commercialization. Platforms like &#34;BaiLian&#34; serve as crucial bridges connecting model capabilities with actual enterprise applications.
Regarding the open-source strategy, management's attitude is pragmatic: the core value of open-source models lies in enhancing influence, attracting developers, and expanding usage scope. Its commercial logic is more about driving traffic to Alibaba's full-stack system, and then monetizing through hosting services, enterprise-grade tools, and cloud services, rather than as a direct profit source.
Notably, management emphasized that third-party AI model companies should not be viewed solely as competitive threats. Many of these players still require cloud infrastructure, training and inference capabilities, and channels to reach enterprise customers. Alibaba can collaborate with them as a cloud service provider, platform enabler, or distribution partner. Management also stated that AI-related demand is expanding from a few large internet companies to a broader range of industries and enterprise clients. Customers are moving from experimental phases to more routine and deeply embedded usage, which is crucial for forming sustained cloud and AI revenue.
Furthermore, management indicated that the operating environment for Alibaba Cloud is no longer solely driven by scale. Pricing discipline is gradually being established, and price adjustments will be systematically implemented through renewals and new contracts, rather than abrupt or across-the-board increases.
<h2>Flash Sales Business: Ecosystem Value Underestimated, Loss Reduction Timeline Still Unclear</h2>
Management spent considerable time at the meeting explaining that the instant retail business should not be evaluated solely through the lens of short-term losses. The business is positioned as a strategic tool to increase user frequency, enhance engagement, expand category coverage, and consolidate the user ecosystem. Its investment logic stems partly from ecosystem synergy, rather than pursuing profit performance for the standalone business.
J.P. Morgan believes this strategic positioning is logically sound and potentially underestimated by the market. If management's judgment is correct, the current losses in flash sales are actually helping Alibaba consolidate its moat in the commerce business, rather than simply expanding low-quality GMV.
However, the challenge is that this remains a medium-term stock view, while the stock is currently trading on short-term earnings adjustments. Management is more confident in the underlying logic for eventual improvement than in providing a clear short-term timeline. The focus is on building scale, improving order density, and optimizing category structure, rather than shrinking investment to forcibly improve short-term profit margins. J.P. Morgan noted that investors will continue to focus on three questions: the pace of improvement in unit economics, the sustainability of user growth, and when the ecosystem value will be more clearly reflected in reported financial data.
<h2>Market Pricing Ignores Optional Value of Cloud Business and Flash Sales</h2>
J.P. Morgan pointed out that the current market pricing of Alibaba seems to be based solely on the profitability of its domestic e-commerce business. The firm estimates that the company's current valuation is about 10 times the profit of its domestic e-commerce business, which J.P. Morgan projects to be RMB 196 billion in fiscal year 2027. Meanwhile, the market assigns zero residual valuation to the Cloud Intelligence Group's 36% year-over-year revenue growth, the triple-digit growth in AI product revenue for ten consecutive quarters, and the instant retail platform progressing according to management's set target of RMB 1 trillion in GMV for fiscal year 2028.
J.P. Morgan disagrees with this assessment. The firm believes that if the cloud revenue target of $100 billion is achieved and receives a reasonable valuation, the market value of the cloud business alone could reach $400 billion, but the current stock price does not yet reflect this potential.
The firm maintained its US target price for Alibaba at $205, based on a 16x multiple of its fiscal year 2028 expected P/E ratio. It also uses a sum-of-the-parts valuation as a secondary method: applying a 14x multiple of its calendar year 2026 expected P/E ratio to core e-commerce profits and a 6x multiple of its calendar year 2026 expected P/S ratio to the cloud business. Major downside risks include competitive threats from large internet companies like Tencent and Baidu in local life services; continued pressure on profit margins from the long investment cycle for digital content; and slower-than-expected improvement in mobile business monetization.

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J.P. Morgan believes that Alibaba's investor day reinforced its long-term investment narrative, but the stock price will be constrained by the pace of earnings realization in the short term. Management clarified that AI and cloud businesses are strategic priorities and are being monetized through a full value chain layout, but the market needs clearer evidence before assigning a higher valuation. This includes continued acceleration in cloud business, improved visibility in AI monetization, and profit margins not being pressured beyond expectations by increased investment. The current market pricing only reflects domestic e-commerce profits, completely ignoring the optional value of the cloud business and flash sales. The firm maintains its 'Overweight' rating

- Morgan Stanley reports that Alibaba's performance meeting emphasized its long-term investment narrative but expects short-term stock constraints due to profit realization timing.  
- The report indicates a target price of $205 for US shares and HK$200 for Hong Kong shares, citing the increasing importance of AI and cloud business as strategic focus areas.  
- Analysts note that the market is undervaluing potential revenue from these sectors, with current pricing reflecting only domestic e-commerce profits, failing to account for broader business growth.

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J.P. Morgan Alibaba Investor Day: Company's Long-Term Value Narrative Intact, Valuation Significantly Undervalues Optional Value