Why Alibaba Stock Is Falling Today
Shares of Alibaba Group fell nearly 3% amid a broader market sell-off following new inflation data, despite an analyst raising the price target from $140 to $170. The inflation index rose 0.4% in February, raising concerns about higher inflation. Mizuho's analyst noted strong AI progress and increased revenue outlook for Alibaba's cloud division. Chinese tech stocks are seen as appealing due to government support and attractive valuations, but investors should be prepared for volatility due to changing sentiments around regulations and the economy.
Shares of the large Chinese e-commerce and tech company Alibaba Group (BABA -2.50%) traded nearly 3% lower as of 12:47 p.m. ET today for no obvious reason, but likely due to the broader market sell-off after new inflation data this morning. A Wall Street analyst also lifted his price target on the stock on Friday.
AI progress is impressive
Stocks across the board were reeling today after the Federal Reserve's preferred gauge for inflation, the Personal Consumption Expenditures index, rose 0.4% in February from the prior month and came in 2.8% higher year over year. Both numbers were slightly above estimates, raising concerns about higher inflation.
Meanwhile, Mizuho analyst James Lee maintained an outperform rating on Alibaba and upped his price target from $140 to $170, citing strong progress in the company's artificial intelligence (AI) strategy. Lee also believes that the company's AI spending will result in better product recommendations and therefore more products sold.
Lee also boosted his revenue outlook for Alibaba's cloud division in the fiscal year 2026 from 13% growth to 17% year over year. He arrives at a $170 price target by applying a 12 multiple on earnings before interest, taxes, depreciation, and amortization, which he increased from 10 due to better visibility into the company's product road map and better sentiment related to enterprise spending in China.
Chinese equities look more appealing
Due to more support from the Chinese government, potential future stimulus, and more belief in AI innovation in the country, Chinese tech stocks certainly look appealing.
Their valuations are also more attractive, with Alibaba trading at less than 15 times forward earnings. However, if you invest, do so for the long term and prepare for volatility, as sentiment around the regulatory landscape and economy can change quickly and result in volatility.