Morgan Stanley analyst Gary Yu recently reduced Alibaba's (BABA) stock price target from $190 to $180, about two weeks before the company’s late-August earnings report. Even with this cut, the new target remains roughly 60% higher than Alibaba's closing price of $112.14 on Friday, indicating Wall Street still sees substantial value compared to current market pricing.
Why the Price Target Dropped
Yu slashed the price target in early July but maintained an overweight rating on Alibaba shares. This cautious adjustment echoes moves from other banks: HSBC lowered its target from $176 to $170 last month while keeping a buy rating, and Daiwa cut its target from $200 to $175 in late June after noting weak sales during China’s 618 shopping event.
Focus Areas and Challenges Ahead
Yu highlights Alibaba’s cloud infrastructure China’s largest as a key growth driver, predicting the company will gain market share amid China’s evolving AI landscape. The firm also supports Alibaba through strong cash flow, dividends, and share buybacks. Morgan Stanley notes a slightly eased regulatory environment online, suggesting Alibaba is positioned to benefit going forward.
Despite these positive factors, Alibaba faces pressure after the European Commission fined its AliExpress platform 550 million euros on July 20 for violating the Digital Services Act (DSA). The company deems the penalty excessive and has until October 20 to submit a corrective plan.
Alibaba’s stock has climbed approximately 18% in the past month but remains far below its 52-week high of $192.67. The upcoming earnings report will likely determine if Alibaba’s cloud growth can accelerate enough to justify closing the wide valuation gap.
The information provided is for informational purposes and does not constitute financial advice.
