Alibaba (BABA) sees double-digit rally... but Wall Street 'lowers' price targets

▲ Alibaba (BABA)/AI Generated Image

Alibaba (BABA) shares surged 11%, their biggest jump in 10 months, but Wall Street analysts consecutively lowered their price targets. If it fails to break $112.89, it could fall back to $96.82, marking the beginning of a price battle that will determine whether the rebound can continue.

According to crypto media outlet BeInCrypto on July 9 (local time), Alibaba's stock price jumped approximately 11% on July 8, nearing $109. This was the largest single-day gain in about 10 months. News that immediate commerce business losses decreased from the previous quarter and overall profitability remained stable, as revealed in an update ahead of its earnings report, stimulated buying interest.

The rapid growth of the cloud business driven by artificial intelligence (AI) demand and news of a U.S. court victory also boosted investor sentiment. However, Wall Street's view was not as enthusiastic as the stock's surge. Morgan Stanley lowered its price target from $190 to $180, and Citi reduced its target from $208 to $192. Daiwa lowered its target from $200 to $175, and HSBC from $176 to $170, but all maintained their "buy" ratings.

Alibaba's substantial AI investments putting pressure on short-term profits and cautious spending by Chinese consumers weighing on core advertising and commerce revenue were cited as reasons for the lowered price targets. While long-term AI growth expectations remained, Wall Street adjusted its upside potential lower than before. This created a contradictory situation where the stock surged, but brokerage firms lowered their price targets.

Fund flows supported the buying interest. The Chaikin Money Flow indicator, which gauges institutional fund movements, had been rising since June 16 even as the stock price was pushed to a low, and trading volume surged to approximately 39 million shares on the day of the rally. The put-call ratio in the options market also favored a bullish sentiment, with a ratio of 0.37 based on volume and 0.58 based on open interest, both below 1.

For Alibaba to sustain its rebound, it needs to reclaim $109.86 and hold the $110 level. If it breaks through the major resistance of $112.89, the next target prices are $122.33 and $147.09. Conversely, if it gets stuck at $112.89, it could retreat to the $96.82 support level, making the breakthrough of $112.89 a crucial turning point between a full recovery and a renewed decline.

[Key Article Summary]

-Alibaba's stock surged 11%, marking its largest single-day gain in about 10 months, but major brokerage firms consecutively lowered their price targets.

-The burden of AI investment and sluggish Chinese consumption were cited as reasons for the lowered price targets, while "buy" ratings were maintained.

-If $112.89 is breached, $122.33 and $147.09 become possible, but failure could lead to a retreat to the $96.82 support level.

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