Here's why JPMorgan, Morningstar are bullish on Alibaba stock

Alibaba's stock has seen a significant rally, reaching its highest level since August 2021, following upgrades from JPMorgan and Morningstar. JPMorgan raised its price target to H$240, citing Alibaba's strong strategic positioning and planned $50 billion-plus investment in AI and cloud computing, which saw its Cloud Intelligence Group revenue grow 26% last quarter. This resurgence is also bolstered by an apparent easing of regulatory scrutiny from Beijing, with investors anticipating AI and cloud growth will offset challenges in traditional retail and food delivery segments.

Analysis

Alibaba's stock has demonstrated a significant rally, reaching its highest point since August 2021 and surging nearly 200% from its 2024 lows, propelled by a confluence of positive catalysts. The primary drivers are bullish upgrades from major financial institutions; JPMorgan raised its price target to H$240, citing the company's strategic positioning across the entire artificial intelligence value chain—from compute to applications—and Morningstar highlighted the stock's undervaluation. This optimism is substantiated by strong performance in the Cloud Intelligence Group, which reported a 26% revenue increase to $4.6 billion last quarter. This growth narrative is further bolstered by the company's commitment to invest over $50 billion in AI to capture a market the CEO projects could reach $4 trillion. Critically, the long-standing regulatory overhang appears to be dissipating, signaled by an easing of official criticism and the return of founder Jack Ma, which has significantly de-risked the investment case. While the AI and cloud segments are positioned as key growth engines, they are intended to offset headwinds in the traditional retail and food delivery (Ele.me) divisions, where competition from rivals like JD.com has initiated a pricing war. The bullish fundamental outlook is mirrored by strong technical indicators, with the stock breaking a key resistance level at $142.8 and indicators like the RSI and MACD signaling continued upward momentum.

Key Decisions for Investors

• Given the strong analyst upgrades, tangible growth in the cloud division (26% YoY), and a significant easing of regulatory risk, investors could view the current rally as fundamentally justified with potential for further upside towards the H$240 price target.
• It is crucial to monitor the performance of the core commerce and food delivery segments, as the investment thesis relies on the high-growth AI and Cloud businesses successfully offsetting competitive pressures and slower growth in these traditional areas.
• While technicals are bullish, investors should note the stock's rapid 200% appreciation from its 2024 low and consider staggering entry points or using key technical levels, such as the former resistance at $142.8, as potential support zones for new positions.