Alibaba Shares Fall After Target Price Cut
Alibaba shares declined in Hong Kong trading on Thursday after Jefferies lowered its price target on the Chinese e-commerce giant. The downgrade reflects growing concerns over rising artificial intelligence (AI) spending and mounting losses in non-core business segments.
The stock dropped 2.9% to HK$122.70, making it one of the biggest drags on the Hang Seng Index, which slipped 0.6% during the session.
Jefferies Lowers Price Target but Maintains Buy Rating
Jefferies reduced its price target on Alibaba’s U.S.-listed shares (NYSE: BABA) to $185 from $212, while maintaining a Buy rating. The revised outlook takes into account increased investment in AI development and higher expected losses across non-core operations.
Rising AI Spending Pressures Profitability
According to Jefferies, Alibaba’s aggressive push into artificial intelligence — particularly its Qwen AI platform — is driving up costs. The company recently launched its AI text-to-video application, Happy Horse, which has seen strong initial traction.
However, heavy promotional spending, especially during the Lunar New Year period, is expected to weigh on short-term earnings.
Non-Core Business Losses Increase
Alibaba’s “All Others” segment, which includes non-core and retail operations, is projected to report higher losses in the March quarter. This increase is largely attributed to elevated subsidies and promotional campaigns aimed at boosting user growth.
Earlier this year, Alibaba announced a 3 billion yuan ($431 million) investment in Lunar New Year promotions, with a significant portion directed toward expanding adoption of its Qwen AI services.
Outlook: Losses May Improve Long-Term
Despite near-term pressure, Jefferies remains optimistic about Alibaba’s longer-term outlook. The brokerage expects losses in the company’s quick commerce segment to improve in the March quarter.
Looking further ahead, losses are projected to decline significantly by fiscal 2027, potentially dropping by half compared to previous years.
