Alibaba's stock slipped in Hong Kong trading after Jefferies lowered its price target on the Chinese e-commerce giant, citing elevated spending on artificial intelligence promotion and growing losses tied to non-core operations.
The shares fell 2.9% to HK$122.70, making Alibaba one of the biggest detractors from the Hang Seng index, which itself lost 0.6% on the session.
Jefferies trimmed its target on Alibaba's U.S.-listed shares to $185.0 from $212.0 but kept a Buy rating on the company. The brokerage said its revised valuation reflects higher forecasted outlays to market Alibaba's Qwen AI offerings and anticipated larger losses within the company's non-core units.
AI promotion and earnings pressure
Jefferies pointed to Alibaba's intensified promotional push for its Qwen artificial intelligence products as a key factor behind the lower price target. The brokerage noted that while the company's AI text-to-video application, Happy Horse, was a successful introduction, the cost of promoting AI - particularly around the important Lunar New Year period - is likely to pressure near-term earnings.
Alibaba previously disclosed it planned to spend 3 billion yuan ($431 million) on Lunar New Year promotions, with a significant portion aimed at driving users to its Qwen AI app. Jefferies incorporated that elevated promotional expense into its valuation assumptions.
Non-core losses and operating segments
Jefferies also highlighted expectations for increased losses in Alibaba's "All Others" segment, which encompasses non-core and retail operations. The brokerage said losses in that segment are likely to have risen in the March quarter as a result of heavier subsidies and promotional activity.
At the same time, Jefferies expects losses related to quick commerce to show improvement in the March quarter, and projects fiscal 2027 losses in that area to be roughly half of the prior year.
Investor tools and evaluation
The market note included mention of an AI-driven stock evaluation tool that assesses Alibaba alongside many other companies using a broad set of financial metrics. That tool evaluates fundamentals, momentum, and valuation, and the commentary noted it can surface names that fit particular risk-reward profiles.
Bottom line
Jefferies' recalibration reflects the brokerage's view that Alibaba's near-term profit metrics will be affected by higher AI promotion costs and rising losses in certain non-core activities, even as some loss-making units are expected to narrow losses over time.