Key Takeaways
- Shares slipped 2.9% in Hong Kong trading, closing at HK$122.70
- Jefferies reduced BABA’s price target from $212 down to $185 but maintained its Buy recommendation
- Increased promotional expenses for Qwen AI platform expected to pressure profitability
- The “All Others” non-core division is projected to see deeper losses during Q1 2027
- Quick commerce division losses anticipated to narrow in the upcoming March quarter
Shares of Alibaba experienced a notable decline during Thursday’s Hong Kong session following a price target reduction from Jefferies, which pointed to mounting artificial intelligence expenditures and widening deficits across its peripheral business operations.
Alibaba Group Holding Limited, BABA
The Chinese tech giant’s stock retreated 2.9% to settle at HK$122.70, contributing significantly to the Hang Seng index’s 0.6% decline for the session.
Jefferies adjusted its U.S.-listed share price objective for BABA downward from $212 to $185 while preserving its Buy stance on the stock.
The revised forecast incorporates two primary challenges. Initially, the company is allocating substantial resources toward marketing its Qwen artificial intelligence offerings. Additionally, deficits within its peripheral business divisions are anticipated to widen.
Alibaba introduced Happy Horse, an AI-powered text-to-video application, during the early months of this year. While Jefferies acknowledged the rollout as successful, the firm cautioned that aggressive marketing campaigns surrounding Lunar New Year festivities would likely compress margins in the immediate term.
The e-commerce behemoth committed 3 billion yuan — approximately $431 million — toward Lunar New Year promotional initiatives. A significant share of these funds was directed at acquiring users for the Qwen platform.
Such aggressive spending depletes capital reserves rapidly, with the financial impact becoming increasingly visible in analyst projections.
Non-Core Divisions Face Mounting Challenges
Alibaba’s “All Others” division, encompassing peripheral and retail operations, is forecast to report expanded losses during the March quarter. Elevated subsidy programs and promotional campaigns are the principal factors behind this trend.
Despite near-term headwinds, Jefferies projects that fiscal 2027 losses within this segment will decline by approximately 50% year-over-year. While this suggests positive long-term trajectory, the immediate outlook remains choppy.
Cloud Computing Remains Growth Engine
Not all divisions face headwinds. Jefferies anticipates that AliCloud will sustain its robust expansion trajectory and may even gain momentum during the March quarter.
The cloud infrastructure division continues to represent one of the company’s most reliable growth engines, with the analyst citing this strength as justification for maintaining a Buy recommendation despite the lowered price objective.
Quick commerce operations are also projected to demonstrate improved loss metrics in the March quarter, providing additional support for the bullish thesis even as other segments encounter obstacles.
Jefferies retained its Buy recommendation on BABA shares alongside the target reduction, indicating the firm continues to identify meaningful appreciation potential from present valuation levels.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
