Freedom recommends buying Alibaba shares with a target price of $170 and upside potential of 36.7%

Freedom analysts recommend buying shares of Chinese technology company Alibaba Group (BABA) and set a target price of $170. At a price of $124,40 at the time of preparing the review, this corresponds to upside potential of 36,66%. Among the key drivers, analysts highlight accelerating cloud business and artificial intelligence-based solutions, a recovery in domestic consumer demand in China, and Alibaba’s ability to maintain its position amid intense competition.

More on companies — in the new Investment Review No.351 from Freedom analysts.

Alibaba is one of China’s largest technology companies. It develops e-commerce, cloud services, and artificial intelligence technologies, and also owns the Alipay payment platform. Among the group’s largest marketplaces are Alibaba.com, Taobao, and Tmall.

Cloud business and artificial intelligence could accelerate Alibaba’s growth

One of the main investment arguments cited by analysts is the acceleration of the cloud segment and AI-related business. According to Freedom’s forecasts, Alibaba’s cloud segment revenue could grow from about $23 bn in fiscal 2026 to $100 bn by 2030.

Growth is supported by rising demand for computing power and AI products, as well as restrictions on supplies of advanced U.S. chips to China. These restrictions increase the relevance of China’s own technologies and could help Alibaba narrow the gap with the largest U.S. developers.

The latest earnings report has already shown an acceleration in the cloud business. In the fourth fiscal quarter, revenue of Alibaba’s cloud unit rose 38% year over year, to 41,27 bn yuan. Revenue from AI-based products reached 8,97 bn yuan and grew at triple-digit rates for the eleventh consecutive quarter. 

A recovery in demand in China will support Alibaba’s core business

Another potential driver remains the recovery of consumer demand in the domestic market. Alibaba continues to be one of the largest players in China’s e-commerce sector, so faster online sales could directly support its financial results.

Freedom analysts expect that measures by Chinese authorities to stimulate the economy and consumption will help e-commerce recover. This is important for Alibaba, since domestic commerce remains one of the key sources of its revenue.

At the same time, the latest report was mixed. In the fourth fiscal quarter, Alibaba’s total revenue increased from 236,5 bn to 243,4 bn yuan, but came in below market expectations of 247,1 bn yuan. Excluding the sold Sun Art and Intime businesses, like-for-like growth was 11%. 

Alibaba strengthens its position in the artificial intelligence market

An additional factor for the company may be the expansion of its own computing infrastructure. Previously, Alibaba considered the possibility of purchasing from AMD between 40,000 and 50,000 MI308 accelerators to run artificial intelligence applications. Such accelerators are specialized chips designed to perform the large volume of computations required to train and use AI models. 

This interest fits into Alibaba’s broader strategy of developing cloud computing and its own AI-based products. The more computing power available to the company, the faster it can scale such services and meet growing demand from corporate clients.

Competition in the Chinese market remains the main risk

Despite positive expectations, Alibaba operates in an environment of intense competition. In the domestic market, the company competes with other major e-commerce platforms and delivery services, which requires ongoing investment in pricing, promotion, and technology.

Freedom analysts believe Alibaba can maintain its position thanks to the scale of its business, strong marketplaces, the development of its cloud segment, and investments in artificial intelligence. However, intensifying competition or a weaker recovery in consumer demand in China could slow the company’s growth.

Freedom recommends buying Alibaba (BABA) shares with a target price of $170. At a price of $124,40, this target implies upside potential of 36,66%. To limit possible losses, analysts suggest closing the position if the share price falls to $105.

This is not an individual investment recommendation.