Alibaba stock price target lowered to $135 at BofA on delivery investment

Investing.com - BofA Securities has lowered its price target on Alibaba (NYSE:BABA) to $135 from $145 while maintaining a Buy rating, citing increased investment in the company’s food and on-demand delivery services. Currently trading at $106.64, InvestingPro analysis suggests the stock is significantly undervalued, with analyst targets ranging from $113.53 to $189.88.

The firm noted that Alibaba’s food and on-demand delivery orders have grown significantly since the May 2 launch of Taobao Insta-shopping, increasing from fewer than 30 million orders per day to 60 million orders by June 23. This growth has been driven by Taobao App’s substantial traffic and heavy consumer subsidies. The company’s solid financial health score of GOOD from InvestingPro and healthy revenue growth of 5.86% support this expansion strategy.

BofA estimates that losses related to this initiative exceeded RMB10 billion in the June quarter, assuming an average cost of RMB3-4 per order. On July 2, Alibaba announced plans to invest RMB50 billion in food and on-demand delivery over the next 12 months and launched aggressive summer promotions. With a P/E ratio of 15.24 and market capitalization of $242 billion, the company appears well-positioned to absorb these investments.

The company’s Super Discount Day on July 5 resulted in a record 80 million orders, including 13 million quick commerce orders, and engaged 200 million active consumers. BofA now expects average daily orders to approach 70 million in the September quarter.

The firm projects that July through November 2025 will represent the peak investment phase as Alibaba builds consumer mindshare, upgrades its supply chain, optimizes system algorithms, and tests cross-selling opportunities.

In other recent news, Alibaba’s financial performance and strategic initiatives have been the focus of several analyst updates. Susquehanna maintained its Positive rating on Alibaba with a price target of $175, citing a mixed fourth-quarter performance where revenues fell short but profitability exceeded expectations. The firm highlighted Alibaba’s strategic investments in artificial intelligence as a growth catalyst. Similarly, Benchmark adjusted its price target to $176 from $190, maintaining a Buy rating despite Alibaba’s revenue underperformance, attributing this to outdated consensus estimates and weaker results in the AIDC division. Benchmark noted strong growth in Alibaba’s core commerce and cloud segments.

Morgan Stanley (NYSE:MS) has also weighed in, lowering its price target to $150 from $180 due to significant investments in instant commerce but maintaining an Overweight rating, recognizing Alibaba as a leading AI enabler. The firm expects a 16% year-over-year decline in consolidated EBITA for the fiscal first quarter, while projecting a 22% growth in cloud revenue. Meanwhile, Macquarie reduced its price target to $139 from $171.50, maintaining an Outperform rating, and noted pressures on e-commerce margins due to a price war in the instant delivery market.

Morgan Stanley reaffirmed its Overweight rating with a $180 price target, citing anticipated growth in Alibaba’s cloud revenue and the China marketing platform. Despite the lowered targets, analysts express confidence in Alibaba’s long-term growth potential, particularly in cloud computing and AI, while acknowledging near-term challenges.

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