Key Highlights
- Alibaba declined 2.9% in Hong Kong trading, closing at HK$122.70
- Jefferies reduced BABA’s price target from $212 down to $185, maintaining a Buy rating
- Increased AI investment in Qwen promotional campaigns is projected to impact profitability
- Non-core “All Others” business segment losses are anticipated to expand in Q1 2027
- Quick commerce unit losses are expected to show improvement during the March quarter
Shares of Alibaba experienced a decline in Hong Kong trading on Thursday following a price target reduction from Jefferies, which pointed to escalating artificial intelligence investments and widening deficits in peripheral business operations.
Alibaba Group Holding Limited, BABA
The e-commerce giant’s shares retreated 2.9% to HK$122.70, positioning it among the largest decliners on the Hang Seng index, which shed 0.6% during the session.
Jefferies trimmed its U.S. ADR price objective on BABA from $212 down to $185. Despite the reduction, the brokerage maintained its Buy recommendation.
The revised target stems from two primary headwinds. Initially, Alibaba is allocating substantial resources to market its Qwen artificial intelligence offerings. Additionally, red ink in its peripheral business divisions is projected to deepen.
Alibaba unveiled an AI-powered text-to-video application named Happy Horse during the early months of this year. While Jefferies characterized the product rollout as successful, the firm cautioned that substantial promotional outlays surrounding Lunar New Year festivities would likely compress near-term profit margins.
Alibaba committed to deploying 3 billion yuan — approximately $431 million — toward Lunar New Year marketing initiatives. A significant share of these funds was directed at attracting users to the Qwen platform.
Such aggressive expenditure consumes capital rapidly, and the financial implications are beginning to surface in analyst projections.
Challenges in Peripheral Business Units
Alibaba’s “All Others” division, encompassing non-core and retail operations, is projected to report elevated losses during the March quarter. Enhanced subsidies and promotional campaigns are the principal factors behind this trend.
For the full fiscal 2027 period, losses within this segment are still anticipated to decline by half compared to the previous year, per Jefferies estimates. While this indicates long-term improvement, the short-term outlook remains challenging.
Cloud Computing Division Continues to Shine
Not all business lines face obstacles. Jefferies anticipates AliCloud will sustain its robust expansion trajectory and could potentially accelerate during the March quarter.
The cloud computing division represents one of Alibaba’s more dependable growth engines, and the analyst emphasized it as justification for retaining the Buy rating notwithstanding the target price reduction.
Quick commerce operations are also projected to demonstrate loss improvement in the March quarter, providing support for the bullish investment thesis even as other divisions confront obstacles.
Jefferies preserved its Buy recommendation on BABA despite the lowered price objective, indicating the firm continues to identify upside potential from present trading levels.
