Key Takeaways
- Alibaba shares declined 2.9% during Hong Kong trading, closing at HK$122.70
- Jefferies reduced BABA’s price target from $212 down to $185, maintaining a Buy recommendation
- Escalating investments in Qwen AI promotional campaigns are projected to pressure profit margins
- The “All Others” non-core business segment is anticipated to see widening losses during Q1 2027
- Quick commerce unit losses are projected to narrow in the current quarter
Shares of Alibaba experienced a notable decline during Thursday’s Hong Kong trading session following a price target reduction from Jefferies, which pointed to mounting artificial intelligence expenditures and expanding deficits across peripheral business operations.
Alibaba Group Holding Limited, BABA
The stock retreated 2.9% to reach HK$122.70, positioning it among the most significant contributors to the Hang Seng index’s 0.6% decline for the session.
Jefferies adjusted its U.S.-listed share valuation for BABA downward from $212 to $185. Despite the reduction, the investment firm maintained its positive Buy recommendation on the equity.
The revised valuation incorporates two principal challenges facing the company. Initially, Alibaba is allocating substantial resources toward marketing its Qwen artificial intelligence offerings. Additionally, deficits within peripheral operational divisions are forecast to widen.
Earlier this year, the company introduced Happy Horse, an AI-powered text-to-video application. While Jefferies characterized the product debut as successful, the firm emphasized that aggressive marketing initiatives surrounding the Lunar New Year festivities would likely compress earnings in the immediate term.
The e-commerce giant committed 3 billion yuan — approximately $431 million — toward Lunar New Year promotional activities. A substantial share of these funds was directed toward customer acquisition for Qwen.
Such intensive spending depletes financial resources rapidly, with these impacts becoming increasingly visible in financial projections.
Challenges in Peripheral Business Units
Alibaba’s “All Others” division, encompassing peripheral and retail operations, is projected to report enlarged losses during the March quarter. Expanded subsidy programs and heightened promotional expenditures represent the primary catalysts.
Looking toward fiscal 2027, Jefferies anticipates losses within this segment will decline by approximately 50% compared to the previous fiscal period. While this suggests improvement over an extended timeframe, near-term performance remains challenging.
Cloud Computing Remains Growth Engine
Not all business segments face downward pressure. Jefferies forecasts that AliCloud will sustain its robust expansion trajectory and may potentially accelerate during the March quarter.
The cloud computing division represents one of Alibaba’s most consistently performing growth verticals, which the analyst emphasized as justification for preserving the Buy recommendation notwithstanding the target price reduction.
The quick commerce division is also projected to demonstrate improving loss metrics during the March quarter, providing additional support for the bullish thesis even as certain segments confront operational challenges.
Jefferies retained its Buy stance on BABA shares alongside the target adjustment, indicating the firm continues to identify appreciation potential from present valuation levels.
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