Alibaba (BABA) stock is jumping about 8% in pre-market trading, even though it remains down more than 15% year-to-date as heavy AI spending weighs on near-term profits. In its recent earnings update, the company reported a sharp 67% drop in net income, driven by higher spending on AI and quick-commerce operations. Still, Alibaba Cloud revenue rose 36%, with AI-related products posting triple-digit growth for the tenth straight quarter. Wall Street remains upbeat about Alibaba stock, backed by strong AI demand in the cloud business, with analysts seeing about 56% upside from current levels.
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Recently, Morgan Stanley analyst Gary Yu reiterated an Overweight rating and a $180 price target, pointing to improving cloud trends, steady margins, and early signs that Alibaba’s AI push is starting to pay off.
Morgan Stanley Analyst Sees Higher Upside Potential in BABA Stock
The analyst highlighted recent cloud price hikes — including increases in AI-related services and storage — as a sign of strong demand, noting that customers appear willing to absorb higher costs. He also expects Alibaba to maintain long-term cloud margins of around 20%, suggesting growth is not coming at the expense of profitability.
Yu also pointed to Alibaba’s expanding AI push, particularly the launch of its Qwen app, as a key step forward. In his view, this marks a shift toward engaging directly with consumers, which could open up new monetization opportunities over time as AI adoption grows. At the same time, he expects losses in the company’s quick-commerce unit to fall in the March quarter, showing better cost control even as Alibaba continues to invest.
Overall, the analyst sees Alibaba gaining strength across its key businesses, with solid cloud demand, pricing power, and AI efforts supporting a more positive view on the stock.
Is Alibaba Stock a Buy Now?
Wall Street remains constructive on the stock. Alibaba stock carries a Strong Buy consensus rating, based on 16 Buy ratings and two Holds over the past three months. The average BABA price target stands at $187.23, suggesting roughly 56.39% upside from current levels.
