Freedom Broker experts: cloud and AI could support Alibaba’s rise to $145

Freedom Broker analysts recommend buying Alibaba Group (BABA) shares with a target price of $145 by the end of November. At the current price of $110.24, the upside potential is about 31.5%. Experts highlight three drivers: the development of the cloud and AI businesses, possible support for consumption in China, and improving unit economics in rapid delivery.

How Alibaba’s business is structured

Alibaba is a Chinese technology group developing e-commerce, cloud computing, and artificial intelligence. Its ecosystem includes the Taobao, Tmall, and Alibaba.com marketplaces, the Alibaba Cloud platform, and the Qwen family of AI models.

Freedom Broker believes that an acceleration in the cloud business could raise investors’ expectations for the next quarterly report and support a re-rating of the stock. A potential recovery in e-commerce and lower spending on delivery subsidies complement this scenario.

Cloud is growing faster than the group

For the quarter ended in June, revenue from AI Cloud and Compute Services rose 45% year over year to 48.44 billion yuan. Adjusted EBITA—an operating profit metric before certain expenses—jumped 133% to 5.63 billion yuan. The margin on this metric was about 12%.

Analysts believe these results provide grounds to improve expectations for further growth at Alibaba. Additional support may come from projects presented at the September Apsara conference. They demonstrate the ability to monetize AI models via cloud infrastructure and application services.

Another potential driver is the in-house AI chip Zhenwu V900. Its commercial launch is scheduled for early 2027. The development complements Alibaba’s technology stack combining compute capacity, models, and applications.

Consumption support could increase marketplace turnover

Freedom Broker’s second argument relates to possible additional demand-stimulus measures in China. In August, retail sales rose only 0.4% year over year. In analysts’ view, the weak dynamics preserve the prerequisites for expanding government support.

In particular, experts consider a potential expansion of the trade-in program, which provides government discounts for purchases of home appliances, electronics, and smart devices. This could support turnover on Alibaba’s marketplaces and sellers’ demand for advertising services.

For the company, such a scenario is important amid weakness in the core business. For the quarter ended in June, revenue from China e-commerce fell 8% to 110.9 billion yuan.

Rapid delivery could weigh less on profits

The third pillar of the investment idea is improving unit economics at Taobao Instant Commerce. Analysts estimate that intervention by Chinese authorities has reduced competition for shoppers via subsidies. This creates conditions to cut customer acquisition and retention costs.

Alibaba has already reported improving order economics thanks to higher average ticket sizes and greater delivery efficiency while maintaining market share. Revenue from the rapid commerce segment rose 45% over the quarter to 53.3 billion yuan.

Freedom Broker believes that a larger share of higher-priced orders and non-food items, together with more restrained subsidy spending, could reduce this business’s pressure on the group’s profits.

Investments continue to reduce cash flow

According to the latest report, Alibaba’s total quarterly revenue increased 9% year over year to 268.95 billion yuan. Net profit, however, fell 75% to 10.44 billion yuan, and adjusted net profit declined 38% to 20.72 billion yuan.

Capital expenditures rose 75% to 67.68 billion yuan. Free cash flow was negative: the outflow amounted to 44.67 billion yuan versus 18.82 billion a year earlier. Therefore, cloud business growth is still accompanied by significant costs.

Freedom previously highlighted cloud and in-house AI development

In August, Freedom analysts called cloud services and artificial intelligence key growth factors for Alibaba. At the same time, weak consumer demand in China continued to constrain the performance of traditional e-commerce.

In late September, experts positively assessed the announcement of the company’s own AI processor. In their view, the development could reduce Alibaba’s dependence on U.S. accelerators and strengthen its position in cloud computing. The further impact will depend on the chip’s practical application and the company’s ability to convert AI demand into profit.

This is not an individual investment recommendation.