BABA: From HOLD to BUY, and increase price target to $180

Capital_Insights
09-25

$Alibaba(BABA)$ (Alibaba to HOLD from BUY) - View on the mid- to long-term trajectory of Alibaba’s AI, cloud, and platform investments remains intact while lifting price target to $180 - Tiger Research

We are downgrading Alibaba to HOLD from BUY; However, we believe much of the upside has already been priced in following the sharp recent rally, leaving shares more vulnerable to near-term downside risk.

Strong rally YTD / recent momentum. BABA has staged an exceptional run in 2025, with shares up more than 100% YTD and over 40% in the past month. We attribute this outsized move to renewed investor optimism around its AI/cloud pivot following the recent quarterly results, a series of encouraging corporate announcements, and broader improvements in sentiment toward Chinese technology names.

Recent catalysts driving incremental gains. Shares gained more than 8% intraday on the back of multiple positive developments. At its recent tech conference, Alibaba unveiled Qwen3-Max, a large language model with over 1 trillion parameters, positioning it more aggressively in the AI arms race. The company also disclosed plans to boost its AI spending beyond an original 380 billion yuan (~USD 53 b) commitment, signaling a more aggressive stance. A new strategic collaboration with Nvidia — to integrate Nvidia’s AI tools and support robotics development — has also been well received by the market.

Valuation no longer at a discount. For much of the past five years, Alibaba traded at a steep discount to U.S. peers due to growth, competition, and macro/regulatory concerns. Per FactSet, BABA’s average NTM EV/EBITDA multiple was 9.4x, a ~42% discount to Amazon’s 16.1x. Following the recent surge, BABA now trades at 13.3x NTM EBITDA, essentially in line with Amazon’s 13.0x — removing the valuation cushion that previously underpinned our Buy call.

We continue to see long-term value in Alibaba’s strategic shift toward AI and cloud, with potential to drive durable growth and margin expansion. However, given the sharp re-rating, the risk/reward has become less attractive in the near term. We therefore move to HOLD, preferring to await a more favorable entry point before turning more constructive again. Our estimates are unchanged.

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  • Athena Spenser
    ·09-25
    Hold makes sense. Long-term AI/cloud bright but wait for better entry on BABA.
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  • Astrid Stephen
    ·09-25
    Upside priced in? No way! Qwen3-Max and Nvidia collab will push BABA higher!
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  • moxieoo
    ·09-25
    It's interesting that such a strong run leads to a downgrade.
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