JP Morgan reaffirms "overweight" rating on BABA-W (09988), Alibaba Cloud and Instant Retail valuations are being overlooked.

JPMorgan Chase released a research report stating that it will lower its revenue/adjusted earnings per share forecast for BABA-W (09988) for the 2026 fiscal year by 1% and 10%, respectively, to reflect the December quarter performance. It will also lower its revenue/adjusted earnings per share forecast for the 2027 fiscal year by 3% and 5%. Therefore, the price target for Alibaba (BABA.US) stock is lowered from $215 to $205, while the Hong Kong stock price target is lowered from HK$210 to HK$200. The "overweight" rating for Alibaba Group Holding Limited Sponsored ADR is reiterated. The performance of Alibaba up to the quarter ending December last year highlights a specific and verifiable investment thesis. The current market valuation of Alibaba only reflects the value of its domestic e-commerce business. The bank predicts that Alibaba's domestic e-commerce profit in the 2027 fiscal year will be around 196 billion RMB, calculated at approximately 10 times the price-to-earnings ratio, implying that Alibaba Cloud and the real-time retail platform are completely ignored in the valuation, and no value is reflected. The bank points out that Alibaba Cloud revenue growth has rebounded from a low point of 7% six quarters ago to 36% in the most recent quarter, with AI product revenue continuously recording triple-digit growth for ten consecutive quarters. The management's goal is to achieve $100 billion in cloud business revenue in the next five years, with an annual compound growth rate of approximately 47%. Based on recent quarterly data, the trajectory to achieve this goal has not been negated by the data. If the goal is met and a reasonable valuation is obtained, the value of the cloud business alone could reach $400 billion, higher than Alibaba's current market capitalization of approximately $298 billion.