Alibaba (BABA) Stock Falls After Jefferies Cuts Target on Rising Costs

TLDR

• Alibaba fell 2.9% in Hong Kong trade to HK$122.70
• Jefferies cut its price target on BABA from $212 to $185, while keeping a Buy rating
• Higher AI spending on Qwen promotions is expected to weigh on earnings
• Losses in Alibaba’s non-core “All Others” segment are forecast to grow in Q1 2027
• Jefferies expects quick commerce losses to improve in the March quarter

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Alibaba stock dropped in Hong Kong trade on Thursday after Jefferies lowered its price target on the stock, citing rising AI costs and growing losses in its non-core businesses.

Alibaba Group Holding Limited, BABA

The stock fell 2.9% to HK$122.70, making it one of the bigger drags on the Hang Seng index, which dropped 0.6% on the day.

Jefferies cut its U.S. share price target on BABA from $212 to $185. The firm kept its Buy rating intact.

The lower target reflects two main pressures. First, Alibaba is spending more to promote its Qwen AI products. Second, losses in its non-core business units are expected to grow.

Alibaba launched an AI text-to-video app called Happy Horse earlier this year. Jefferies called the launch a success, but flagged that heavy promotional spending around Lunar New Year is likely to hurt near-term earnings.

Alibaba announced it would spend 3 billion yuan — roughly $431 million — on Lunar New Year promotions. A large portion of that money went toward drawing users to Qwen.

That kind of spending burns cash fast, and the numbers are starting to show up in the forecasts.

Pressure on Non-Core Units

Alibaba’s “All Others” segment, which covers non-core and retail businesses, is expected to post higher losses in the March quarter. Increased subsidies and promotional activity are the main drivers.

Fiscal 2027 losses in that segment are still expected to halve compared to the prior year, according to Jefferies. That’s a longer-term signal, but the near-term picture is bumpier.

AliCloud Still a Bright Spot

Not everything is under pressure. Jefferies expects AliCloud to continue its strong growth streak and potentially accelerate in the March quarter.

Cloud remains one of Alibaba’s cleaner growth stories, and the analyst highlighted it as a reason to hold the Buy rating despite the target cut.

Quick commerce losses are also expected to improve in the March quarter, giving the bull case some support even as other segments face headwinds.

Jefferies maintained its Buy rating on BABA despite cutting the target, signaling the firm still sees upside from current levels.

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