Chinese e-commerce giant Alibaba (BABA) is expected to report its Q1 FY27 earnings next month. BABA stock is down 25% year-to-date. Ahead of the report, both Morgan Stanley (MS) and Citi kept bullish ratings on the stock despite lowering their price targets. The analysts expect Alibaba’s cloud business to remain a bright spot, even as its core e-commerce business faces a tougher quarter.
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Currently, Wall Street expects Alibaba to report earnings per share (EPS) of $1.46 for Q1 FY27 on revenues of $39.57 billion.
Morgan Stanley Expects Cloud to Beat Estimates
Morgan Stanley analyst Gary Yu reiterated an Overweight rating on Alibaba stock while lowering his price target to $180 from $190. The analyst expects Alibaba Cloud revenue to grow 45% year over year, ahead of market expectations, with cloud margins improving to about 11%. He believes AI-related cloud demand remains strong and expects cloud growth to continue speeding up in the coming quarters.
At the same time, Yu expects China e-commerce results to remain under pressure due to soft consumer demand. However, he expects losses from Alibaba’s quick-commerce business to narrow, helping offset weaker results from its China e-commerce business. Despite trimming his price target, Yu continues to view Alibaba as one of his “top picks” because of its attractive valuation and improving cloud business.
Citi Sees Cloud Offsetting Soft E-Commerce
Likewise, Citi analyst Alicia Yap maintained a Buy rating on Alibaba stock while lowering her price target to $192 from $208. She expects weaker customer management revenue after soft retail sales and a muted 6.18 shopping festival. Even so, she forecasts Alibaba Cloud revenue to grow 45% with cloud margins improving to about 11.5%.
Yap also expects smaller quick-commerce losses and stronger cloud profits to support overall earnings. While she expects China’s retail market to remain soft over the next few quarters, she believes Alibaba’s cloud business will continue to be the company’s main growth engine.
Is Alibaba Stock a Buy?
According to TipRanks, Alibaba has a Strong Buy consensus rating based on 14 unanimous Buy ratings assigned over the past three months. The average BABA stock price target of $195.44 implies about 79% upside from current levels.
