Alibaba (BABA) Stock Falls Despite Morgan Stanley Upgrade to Top China Tech Choice

Key Takeaways

• Alibaba shares have declined more than 7% in 2026, currently valued at 16x forward earnings — beneath its historical 10-year average of 19x
• The company reports quarterly results March 19, with analysts projecting $1.67 EPS (down 43% YoY) on $42.1 billion revenue
• BABA has been elevated to Morgan Stanley’s premier China technology investment, displacing Tencent from that position
• Mizuho analysts maintain a $195 price objective, while sum-of-parts analysis indicates potential value reaching $213
• Morgan Stanley projects China’s AI chip market will expand to $67 billion by 2030, achieving 76% local production independence

The year 2026 hasn’t been kind to Alibaba shareholders. Shares have tumbled over 7% since January, pressured by competitive threats in artificial intelligence, uncertainty surrounding corporate strategy, and persistent worries about consumption patterns in China.

Alibaba Group Holding Limited, BABA

Yet a mounting chorus of Wall Street voices believes the decline represents an overreaction.

The stock’s current valuation stands at 16 times projected forward earnings. This marks a discount to its decade-long mean of 19x and represents a significant gap compared to Amazon‘s approximately 26.5x multiple. Barron’s observed the shares appear technically oversold based on recent indicators.

Investors will get fresh financial data when Alibaba unveils fiscal third-quarter results on March 19. The Street anticipates earnings per share of $1.67, representing a steep 43% decline from the prior-year period, while revenue is forecast at $42.1 billion — reflecting 9% growth.

While the earnings contraction appears substantial, the revenue trajectory suggests underlying business momentum. Company leadership will have an opportunity to directly address shareholder concerns during the earnings conference call.

A significant area of uncertainty revolves around Alibaba’s Qwen artificial intelligence division. Media reports have highlighted management restructuring and executive exits within that unit, sparking speculation about strategic disagreements regarding AI priorities.

Citigroup’s Alicia Yap acknowledged these reports in her analysis. However, she emphasized that Qwen experienced robust order volumes during the Chinese Lunar New Year holiday period, serving as an important indicator of market demand.

Qwen has been embedded throughout Alibaba’s flagship consumer properties — including Tmall, Taobao, Freshippo, and Alipay. This represents substantial distribution scale for an AI-powered product.

Cloud Division Remains Underappreciated

Mizuho’s Wei Fang contends that Alibaba’s cloud computing segment isn’t receiving appropriate recognition from investors. She characterizes the company’s underlying fundamentals as “incrementally healthier, driven by AI-accelerated growth.”

Fang positions Alibaba’s cloud infrastructure as China’s strongest. The unit competes head-to-head with Amazon Web Services, Google Cloud, and Microsoft Azure on the global stage.

Her formal price objective sits at $195 per share — representing 43% appreciation from present trading levels. When applying a sum-of-parts valuation framework, she identifies even greater potential worth at $213 per share, with e-commerce and cloud operations accounting for the majority.

She additionally calculates that Alibaba’s remaining business segments, combined with its cash holdings and investment portfolio, contribute approximately $25 per share in standalone value.

Morgan Stanley Elevates BABA to Premier Position

Morgan Stanley took a more decisive stance this week, designating Alibaba as its premier investment recommendation within China’s technology sector — supplanting Tencent from that role.

The investment bank emphasized Alibaba’s comprehensive capabilities spanning the entire AI value chain: semiconductor chips, cloud infrastructure, foundational AI models, and consumer-facing applications.

Regarding AI semiconductors specifically, Morgan Stanley asserts Alibaba’s internally developed chips rank among the industry’s best. They position the company as China’s number-one and the world’s fourth-largest cloud infrastructure operator.

The bank also highlights Alibaba’s open-source AI model initiatives, which have achieved extensive international adoption.

Looking forward, Morgan Stanley projects the total addressable market for AI chips within China will expand to $67 billion by decade’s end. Their analysis anticipates domestic production capabilities will satisfy 76% of demand by that timeframe.

Alibaba’s earnings release is scheduled for March 19.

The post Alibaba (BABA) Stock Falls Despite Morgan Stanley Upgrade to Top China Tech Choice appeared first on Blockonomi.