Alibaba Group Holding Limited

(New York Stock Exchange)
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Somewhat Bullish +45

Alibaba Stock Is Down 38% From Its 2025 High. JPMorgan Sees 81% Upside

AI infrastructure Analyst downgrade Cloud expansion AI-generated analysis

πŸ“‰ Alibaba stock closed approximately 38% below its October 2025 high of $179.97, trading around $111 as of mid-October.

πŸ“Š JPMorgan analyst Alex Yao lowered the price target from $210 to $200 while maintaining an Overweight rating, implying roughly 81% upside.

☁️ Cloud revenue grew 45% in the June quarter, driven by a 45% increase in AI Cloud and Compute Services revenue.

πŸ“‰ Profitability weakened significantly with adjusted EBITA declining 30% and net income dropping approximately 75% in the June quarter.

πŸ’Έ Free cash flow turned into an outflow of RMB 44.7 billion due to heavy investments in AI hardware and quick commerce expansion.

πŸš€ AI-related product revenue achieved triple-digit growth for the twelfth consecutive quarter, highlighting strong demand.

πŸ“ˆ Analysts expect cloud and AI revenue growth to exceed 50% in the September quarter according to recent reports.

πŸ’° Normalized earnings per ADS are forecast to recover from RMB 26.80 in fiscal 2026 to RMB 62.15 by fiscal 2028.

🏦 The consensus price target from 39 analysts stands at approximately $186, representing nearly 67% upside from current levels.

⚠️ Management expects quick-commerce operations to achieve overall profitability by fiscal 2029, indicating continued financial pressure.

πŸ“‰ JPMorgan's $200 target implies a valuation of roughly 25x forward earnings, which is near the company's five-year peak multiple.

πŸ” The stock currently trades at approximately 14 times forward earnings, close to its five-year average valuation.

Bullish Signals
  • Cloud revenue grew 45% in the June quarter, with AI Cloud and Compute Services revenue increasing significantly year over year.
  • The company reported triple-digit growth in AI-related product revenue for the twelfth consecutive quarter.
  • Adjusted EBITA margin in the cloud segment reached approximately 12% as revenue growth accelerated.
  • Analysts anticipate cloud and AI revenue growth could exceed 50% in the September quarter.
  • Bank of America raised its price target to $178, arguing the market may be underestimating the earnings recovery potential.
  • Normalized EPS is expected to increase from RMB 26.80 in fiscal 2026 to RMB 44.35 in fiscal 2027 and RMB 62.15 in fiscal 2028.
  • The stock trades at approximately 14 times forward earnings, which is close to its five-year average valuation of roughly 13 times.
  • JPMorgan maintains an Overweight rating despite lowering the price target, implying substantial upside potential.
Risk Factors
  • Adjusted EBITA declined 30% and adjusted EBITDA fell 14% in the June quarter as profitability weakened.
  • Net income dropped approximately 75% in the June quarter due to heavy investments in AI infrastructure and quick commerce.
  • Free cash flow was an outflow of RMB 44.7 billion, compared with an outflow of RMB 18.8 billion a year earlier.
  • Management expects quick-commerce operations to achieve overall profitability by fiscal 2029, suggesting financial pressure could persist.
  • JPMorgan's $200 price target implies a valuation of roughly 25x forward earnings, which is near the company's five-year peak multiple and difficult to justify with current earnings.
Full Analysis
Alibaba Group Holding (BABA) shares have declined approximately 38% from their October 2025 highs, trading near $111 as of mid-October. Despite this significant drop, JPMorgan analyst Alex Yao maintains an Overweight rating but lowered the price target from $210 to $200, implying roughly 81% upside potential based on the current share price. The company is navigating a period of heavy investment in AI infrastructure and quick commerce, which has impacted short-term profitability. In the June quarter, while revenue grew 9%, adjusted EBITA fell 30% and net income dropped approximately 75%. Free cash flow turned into an outflow of RMB 44.7 billion, reflecting substantial capital expenditure on hardware and expansion initiatives. Alibaba's cloud segment remains a primary growth driver, with AI Cloud and Compute Services revenue surging 45% year over year in the June quarter. The company reported triple-digit growth in AI-related product revenue for the twelfth consecutive quarter, and adjusted EBITA margins in the cloud business reached approximately 12%. Analysts anticipate this high-growth segment could exceed 50% expansion in the September quarter. Wall Street consensus estimates project a significant earnings recovery over the next few years, with normalized EPS expected to rise from RMB 26.80 in fiscal 2026 to RMB 62.15 by fiscal 2028. While JPMorgan's $200 target implies a high valuation multiple of roughly 25x forward earnings, the stock currently trades near its five-year average P/E of 14x, suggesting potential upside if profitability improves alongside revenue growth.