Alibaba Group Holding Limited's stock fell approximately 3% in Hong Kong trading on Thursday, dropping to HK$122.70, following a price target reduction by investment firm Jefferies. The decline made Alibaba a significant drag on the Hang Seng Index, which itself fell 0.6%.
Jefferies lowered its price target for the U.S.-listed Alibaba stock (BABA) from $212 to $185, while maintaining a Buy rating. The analysts framed the move as a reset of expectations rather than a bearish turn, indicating they still see long-term upside potential. The revised target reflects concerns over two primary financial pressures: increased spending to promote Alibaba's Qwen AI offerings and growing losses in the company's non-core "All Others" business segment.
The news has reignited a market debate about the timeline for Alibaba's substantial investments in artificial intelligence to translate into stronger profits. The company's December-quarter results highlighted this tension: while cloud revenue surged 36% driven by AI demand, overall revenue growth of 1.7% to 284.84 billion yuan missed estimates, and net income plummeted 66.3%.
Jefferies pointed to aggressive promotional spending, including a 3 billion yuan (approximately $431 million) campaign during the Lunar New Year to attract users to its Qwen AI platform and its new Happy Horse text-to-video app, as a near-term drag on earnings. The firm forecasts that losses in the non-core segment will increase in the first quarter of fiscal 2027 due to these subsidies, though it expects annual losses for that segment to halve year-over-year.
Despite the cost concerns, Jefferies and other firms like Morgan Stanley, which reiterated an Overweight rating in late March, remain supportive of Alibaba's long-term strategy. They cite the company's advancing AI ecosystem and chip developments as key pillars of the investment thesis. The analysts also noted that AliCloud continues to be a strong growth driver and that losses in the quick-commerce business are expected to improve in the March quarter.
