Key Takeaways
- Alibaba shares declined 2.9% in Hong Kong trading, closing at HK$122.70
- Jefferies reduced BABA’s price target from $212 down to $185 but retained its Buy recommendation
- Increased investment in Qwen AI marketing campaigns is projected to pressure profit margins
- The company’s “All Others” non-core segment is anticipated to see expanding losses in the first quarter of fiscal 2027
- Quick commerce operations are expected to show loss improvements during the March quarter
Shares of Alibaba experienced a decline in Hong Kong trading sessions on Thursday following a price target reduction from Jefferies, which highlighted mounting artificial intelligence expenditures and widening deficits across peripheral business operations.
Alibaba Group Holding Limited, BABA
The equity closed down 2.9% at HK$122.70, representing one of the most significant negative contributors to the Hang Seng index, which surrendered 0.6% during the session.
Jefferies revised its U.S.-listed share price objective for BABA downward from $212 to $185. Despite this adjustment, the investment firm maintained its Buy recommendation on the stock.
The revised target incorporates two principal concerns. Initially, Alibaba is allocating substantial resources toward marketing its Qwen artificial intelligence offerings. Additionally, deficits within its peripheral business divisions are projected to widen.
Alibaba unveiled an AI-powered text-to-video application named Happy Horse during the current year. While Jefferies characterized the product debut as successful, the firm cautioned that aggressive marketing expenditures surrounding the Lunar New Year festivities will likely diminish short-term profitability.
Alibaba disclosed plans to allocate 3 billion yuan — approximately $431 million — toward Lunar New Year marketing initiatives. A substantial share of these funds was directed toward attracting users to the Qwen platform.
Such aggressive spending depletes capital reserves rapidly, and the financial impact is beginning to surface in analyst projections.
Non-Core Business Challenges Intensify
Alibaba’s “All Others” division, encompassing peripheral and retail operations, is projected to register increased losses throughout the March quarter. Elevated subsidy programs and intensified promotional campaigns represent the primary factors.
Fiscal 2027 losses within this division are nevertheless projected to decline by half relative to the previous fiscal year, per Jefferies estimates. While this represents a positive long-term trajectory, the immediate outlook presents greater volatility.
Cloud Computing Maintains Momentum
Not all business segments face headwinds. Jefferies anticipates AliCloud will sustain its robust expansion trajectory and potentially gain momentum during the March quarter.
Cloud infrastructure remains among Alibaba’s most compelling growth narratives, and the analyst emphasized this strength as justification for preserving the Buy recommendation notwithstanding the target reduction.
Quick commerce operations are similarly expected to demonstrate loss narrowing in the March quarter, providing support for the bullish investment thesis even as other divisions confront challenges.
Jefferies preserved its Buy recommendation on BABA despite lowering the price objective, indicating the firm continues to identify appreciation potential from present valuation levels.
