Chinese e-commerce giant Alibaba (BABA) is entering its upcoming earnings season with improving momentum, as stronger cloud demand and rising AI usage begin to show in its business. In a recent note dated April 8, Morgan Stanley analyst Gary Yu has reiterated his Overweight rating and $180 price target, while continuing to call the stock a “top pick.”
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Why Morgan Stanley Is Bullish on Alibaba
A key reason behind the positive view is Alibaba’s cloud business, which Morgan Stanley expects to grow more than 40% year-over-year. The growth is being driven by rising demand for AI services and increased usage across the platform.
The analyst pointed out that recent cloud price hikes should support near-term growth, suggesting that demand remains strong even as prices rise. Over time, AI-related services are expected to become a major contributor to revenue. For context, the company has raised prices for parts of its cloud business, including AI-related services. It said it will raise prices for its T-Head AI chips by 5% to 34% and increase cloud storage costs by about 30%.
Alibaba’s core e-commerce business is also showing signs of improvement. Spending trends picked up earlier this year, which should help support customer management revenue growth.
At the same time, higher spending on AI is weighing on profits. Investments in products like the Qwen platform have increased costs, leading to a sharp drop in overall earnings in the latest quarter.
There are some positives on the cost side, though. Losses in the company’s quick commerce business are expected to narrow over time, which could support profitability in the coming years. Overall, Morgan Stanley believes Alibaba is entering a phase where AI-driven growth is becoming more visible, even though near-term earnings may remain under pressure.
Is Alibaba Stock a Buy Now?
Wall Street remains constructive on the stock. Alibaba carries a Strong Buy consensus rating based on 15 Buy ratings and two Holds over the past three months. The average BABA price target stands at $185.41, suggesting roughly 45.61% upside from current levels.
