Key Highlights
- Alibaba declined 2.9% during Hong Kong trading, closing at HK$122.70
- Jefferies reduced BABA’s price target to $185 from $212, maintaining a Buy recommendation
- Elevated investment in Qwen AI promotional activities expected to pressure profitability
- Non-core “All Others” business segment projected to see increased losses in the first quarter of 2027
- Quick commerce division anticipated to show improvement during the March quarter
Shares of Alibaba experienced a downturn in Hong Kong trading Thursday following an analyst downgrade that highlighted mounting expenses tied to artificial intelligence initiatives and deteriorating performance in peripheral business units.
Alibaba Group Holding Limited, BABA
The e-commerce giant’s stock retreated 2.9% to HK$122.70, emerging as a significant contributor to the Hang Seng index’s 0.6% decline for the session.
Jefferies lowered its U.S.-listed share price objective for BABA to $185 from a previous $212 target. Despite the reduction, the firm maintained its Buy recommendation on the stock.
The revised forecast accounts for two primary challenges. First, the company is allocating substantial resources toward marketing its Qwen artificial intelligence offerings. Second, financial shortfalls in non-essential business operations are projected to widen.
Alibaba unveiled Happy Horse, an AI-powered text-to-video application, earlier this year. While Jefferies acknowledged the product’s successful market entry, the firm warned that aggressive promotional campaigns surrounding Lunar New Year celebrations would likely diminish short-term profit margins.
The technology conglomerate committed 3 billion yuan — approximately $431 million — to Lunar New Year marketing initiatives. A substantial share of this budget targeted user acquisition for the Qwen platform.
Such aggressive spending depletes capital rapidly, and analysts are beginning to incorporate these expenses into their financial projections.
Challenges Mounting for Peripheral Operations
Alibaba’s “All Others” division, encompassing non-primary and retail operations, is projected to register deeper losses during the quarter ending in March. Enhanced subsidy programs and intensified promotional campaigns are the principal factors driving this trend.
Despite near-term setbacks, Jefferies anticipates fiscal 2027 losses within this segment will shrink by half compared to the previous year. While this represents a positive long-term trajectory, immediate quarterly results may disappoint.
Cloud Division Continues Strong Performance
Not all business segments face headwinds. Jefferies projects AliCloud will sustain its robust expansion trajectory and may even experience acceleration during the March quarter.
The cloud computing division remains among Alibaba’s most consistent growth engines, and analysts cited it as justification for preserving the Buy rating despite lowering the price target.
The quick commerce segment is also forecast to narrow its losses in the upcoming March quarter, providing additional support for the bullish thesis even as certain divisions encounter obstacles.
Jefferies retained its Buy stance on BABA notwithstanding the target reduction, indicating the firm continues to identify appreciation potential from present valuation levels.
