Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
On Monday, Mizuho (NYSE:MFG) Securities expressed a positive outlook on Alibaba Group Holding Limited (NYSE:BABA), raising its price target from $140 to $170 while maintaining an Outperform rating on the shares. Currently trading at $132.43 with a market capitalization of $299 billion, the stock has delivered an impressive 56% return year-to-date. The adjustment comes as the firm’s analyst, Jason Helfstein, highlighted Alibaba’s significant advancements and potential in artificial intelligence (AI).
Helfstein’s analysis points to three main factors that underpin the raised price target. Firstly, he believes Alibaba has established a strong foundation for AI investment, which is expected to transition from scaling models to achieving Artificial General Intelligence (AGI). According to InvestingPro data, Alibaba maintains a "GOOD" overall financial health score, positioning it well for continued technological investments. The company is also developing a platform for model APIs, which would expedite the deployment of applications for clients, and aims to provide direct end-user solutions across various industries.
Secondly, the analyst anticipates that Alibaba’s AI investments will bolster internal productivity, leading to enhanced product recommendations and conversion rates. Alongside this, there is an expectation for Alibaba’s businesses outside of Taobao, Tmall, and Grocery (TTG) to diminish their losses, which currently account for 11% of EBITA, and potentially reach a break-even point within two years.
Lastly, the price target increase is supported by a raised forecast for Alibaba’s cloud revenue growth in FY26, from 13% to 17% year-over-year. This adjustment reflects a growing confidence in the company’s product roadmap and an uptick in enterprise spending sentiment within China.
The revised price target of $170 is based on a valuation of 12 times the projected FY26 EBITDA, an increase from the previous multiple of 10, taking into account the expansion of multiples within China’s tech industry and macroeconomic improvements. With a P/E ratio of 19.14 and EV/EBITDA of 7.99, InvestingPro analysis suggests Alibaba is currently undervalued. Helfstein’s report concludes with a strong endorsement of Alibaba, adding the stock as a Top Pick in the Asia Internet sector. For deeper insights into Alibaba’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, along with 12+ actionable investment tips.
In other recent news, Alibaba Group Holding Limited has seen several significant developments. Mizuho Securities has raised its price target for Alibaba to $170, maintaining an Outperform rating due to increased confidence in the company’s AI strategy and its potential impact on revenue and profitability. Similarly, Citi has reiterated a Buy rating with a $170 price target, highlighting Alibaba’s advancements in AI through a strategic partnership with Tongyi-Manus. Benchmark analysts also maintain a Buy rating, setting a higher price target of $190, based on expected improvements in Alibaba’s core divisions, including e-commerce and cloud computing.
Bernstein SocGen Group has upgraded Alibaba’s stock from Market Perform to Outperform, increasing the price target to $165. This upgrade reflects a positive outlook on Alibaba’s capital allocation towards AI infrastructure, which is expected to enhance earnings. Additionally, Bernstein anticipates Alicloud’s revenue to grow by 25-30% in the fiscal year ending March 2026, supported by a favorable AI industry structure. The firm’s analysis also notes potential growth in Alibaba’s domestic e-commerce sector, driven by advancements in advertising technology. These recent developments underscore a strong focus on AI and cloud computing, with multiple analyst firms expressing confidence in Alibaba’s future performance.
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