Alibaba Stock: its price, the AI hype, and if it's just another trap
Alright, let's talk Alibaba, because apparently, we’re all supposed to be thrilled about it. Thrilled. I read these analyst reports and honestly, sometimes I wonder if these folks are living on the same planet as the rest of us. They tell me “Buy,” then immediately slice the price target. Give me a break. That’s not a ringing endorsement, that’s a magician saying, “Look over here at the pretty lights while I hide the actual trick.”
Alibaba stock, BABA, has been on a tear this year, up like 80% or something ridiculous. Everyone’s suddenly high on China tech again. But then Joyce Ju, some analyst at Bank of America, she reaffirms a “Buy” rating, cool. But then she cuts the price target from $200 to $188. Cuts it! Because of “softer near-term growth in e-commerce.” So, the main thing they do is kinda meh, but still buy? This isn't just a mixed signal. No, this is a full-blown contradiction, like being told the water’s fine but it’s actually boiling.
The AI Distraction Playbook
So, what's the big shiny object they want us focused on? AI, offcourse. It’s always AI these days, ain’t it? Alibaba’s pushing their Qwen app, which apparently snagged 10 million downloads in a week. They’re calling it "one of the fastest-growing AI applications to date," and the stock jumped a bit on that news. Alibaba's New Qwen App Smashes 10 Million Downloads In A Week — And Sends Its Stock Soaring: Analysts See Clear Path To China's Next AI-Era WeChat - Alibaba Gr Hldgs (NYSE:BABA), Apple (NASDAQ:AAPL) Good for them. They’re sinking billions – seriously, billions – into AI infrastructure, even blowing past their own $53 billion three-year target because demand "exceeded expectations." Sounds impressive, right?
Their cloud business is the "clear highlight," according to Ju, with revenue up 34% and AI-related revenue seeing triple-digit growth for nine straight quarters. That’s solid, I'll give 'em that. They’re trying to turn Qwen into China's next WeChat, a super-app for the AI era. Big dreams. But here’s my question: how much of this AI boom is actual, sustainable, bottom-line profit, and how much is just a massive capital expenditure trying to catch a trend? Are we just buying into the hype, or is this really a long-term play that’ll pay off before the next bubble bursts?
It’s like they’ve got a leaky bucket, and instead of fixing the holes, they're just pouring in a ton of glittery, expensive AI water. Looks great for a minute, but the leak’s still there. They’re spending like drunken sailors, and guess what? Cash flow declined last quarter because of all this AI, cloud, and quick commerce spending. You don't just throw money at a problem and call it innovation. Sometimes, you just call it bad management.
The Elephant in the E-Commerce Room (and the Money Pit of Deliveries)
Let’s get real about the actual business, shall we? The e-commerce side, Alibaba’s bread and butter, is facing "near-term weakness." The analyst cut her earnings forecasts by 7% to 20% through FY28. That’s not a small haircut, folks. That’s a buzzcut. She tries to wave it away, saying user traffic and engagement are improving. But what good is engagement if people ain't spending enough to hit your revenue targets? It feels like getting a lot of likes on an Instagram post but no one actually buying what you're selling.
Then there’s "quick commerce"—fast grocery and delivery. The division lost a whopping 36-37 billion yuan. Thirty-six billion. Yeah, the analyst says losses are "improving" and "narrowed to about 5 yuan per order." And management expects losses to drop by at least half next quarter. Okay, so instead of losing a ludicrous amount of money, they'll only lose a very large amount of money. What kind of victory lap is that? It’s like saying your broken leg is "improving" because you can now hobble instead of crawl. It’s still broken! This segment is just a money pit, a competitive arms race with JD.com and Meituan where everyone just bleeds cash trying to deliver a bag of chips faster.
Look, Alibaba reported Q2 FY26 revenue of 247.8 billion yuan ($34.8 billion), which was ahead of expectations. Great. But adjusted diluted EPS? 4.36 yuan. Consensus was 6.34 yuan. They missed the earnings mark by a mile. They beat on revenue but flubbed the profits, and then they're telling us to buy because of future improvements and a shiny AI app. This is a bad idea. No, 'bad' doesn't cover it—this is a five-alarm dumpster fire that they’re trying to put out with a garden hose labeled "AI."
The stock even dropped 2.3% on Tuesday, right after all this AI hype. So much for that immediate jolt. Analysts are still "bullish," with 19 "Buy" ratings and two "Hold" ratings. Average price target of $197.43, implying 25% upside. Maybe I'm just the cynical one here, but I see a company trying to pivot hard to AI while its core business sputters and its delivery arm burns through cash. They're telling us to get excited, but for what...?