Key Takeaways
- Shares declined 2.9% in Hong Kong trading, closing at HK$122.70
- Jefferies reduced its price objective from $212 down to $185 while maintaining its Buy recommendation
- Increased investment in Qwen AI promotional campaigns projected to impact profitability
- Non-core “All Others” division expected to report expanded losses in Q1 fiscal 2027
- Analysts anticipate improvement in quick commerce segment losses during the March quarter
Shares of Alibaba experienced a notable decline in Hong Kong trading on Thursday following an analyst downgrade that highlighted mounting costs related to artificial intelligence initiatives and expanding losses across its peripheral business operations.
Alibaba Group Holding Limited, BABA
The stock retreated 2.9% to HK$122.70, emerging as one of the most significant negative contributors to the Hang Seng index, which declined 0.6% during the session.
Jefferies revised its U.S.-listed share price objective for BABA downward from $212 to $185. Despite the reduction, the firm maintained its Buy recommendation on the stock.
The revised target accounts for two primary challenges. Initially, Alibaba is allocating substantial resources toward marketing its Qwen AI offerings. Additionally, deficits across its peripheral business divisions are anticipated to expand.
Alibaba introduced an AI-powered text-to-video application named Happy Horse in early 2025. While Jefferies characterized the rollout as successful, the firm cautioned that aggressive marketing expenditures during the Lunar New Year period will likely pressure short-term profitability.
The company disclosed plans to allocate 3 billion yuan — approximately $431 million — toward Lunar New Year marketing initiatives. A substantial share of these funds was directed at acquiring users for its Qwen platform.
Such aggressive spending depletes financial resources rapidly, with the impact now becoming visible in analyst projections.
Challenges in Peripheral Business Segments
Alibaba’s “All Others” division, encompassing peripheral and retail operations, is projected to report increased deficits during the March quarter. Enhanced subsidies and marketing activities represent the primary cost drivers.
Despite near-term headwinds, fiscal 2027 losses within this segment are still projected to decrease by half compared to the previous year, according to Jefferies. While this represents a positive long-term trajectory, the immediate outlook remains challenged.
Cloud Computing Division Continues Momentum
Not all divisions face headwinds. Jefferies anticipates AliCloud will maintain its robust expansion trajectory and potentially show accelerated growth in the March quarter.
The cloud computing segment remains among Alibaba’s most promising growth drivers, and the analyst cited this strength as justification for retaining the Buy recommendation despite the lowered price target.
Quick commerce operations are also projected to demonstrate improved losses during the March quarter, providing some support for the bullish investment thesis even as other divisions navigate challenges.
Jefferies preserved its Buy recommendation on BABA alongside the target reduction, indicating the firm continues to identify upside potential from present valuation levels.
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