JPMorgan raises Alibaba stock price target to HK$240 on cloud growth

JPMorgan has significantly raised its price target for Alibaba (BABA) to HK$240.00 from HK$165.00, while maintaining an Overweight rating, following the stock's substantial outperformance against the sector average. The upgrade is attributed to better-than-expected Q2 FY2025 cloud revenue growth, management's confident investment strategies in food delivery and quick commerce, and an increasingly optimistic outlook on AliCloud's generative AI adoption and monetization potential, which led to increased cloud revenue and China e-commerce EBITA forecasts for fiscal years 2027/2028.

Analysis

JPMorgan has issued a significant upward revision on its price target for Alibaba (BABA), raising it to HK$240.00 from HK$165.00 while reiterating an Overweight rating. This follows the stock's substantial outperformance against its sector average by 364 percentage points in the past three months. The upgrade is primarily driven by better-than-expected Q2 FY2025 cloud revenue and increased confidence in AliCloud's growth trajectory, particularly after the firm's Apsara conference. Analysts now see greater potential for generative AI adoption and monetization, leading to a 2% and 6% increase in fiscal 2027/2028 cloud revenue estimates, respectively. This optimism extends to synergistic benefits for the core business, with fiscal 2027/2028 China e-commerce adjusted EBITA forecasts also raised by 2% and 3%, reflecting expected value from AliCloud's AI services and management's articulated strategy in food delivery and quick commerce.

Key Decisions for Investors

• Investors may consider JPMorgan's significant price target increase to HK$240.00 and Overweight rating as a strong signal to review or initiate long positions in Alibaba, given the positive fundamental re-rating.
• It is critical to monitor AliCloud's performance in upcoming quarters, as continued momentum in cloud revenue and specific evidence of generative AI monetization are key to validating this bullish thesis.
• Given the stock's recent 364 percentage point outperformance, investors should assess whether the positive catalysts from cloud growth and AI are already partially priced in before adjusting their positions.