J.P. Morgan Alibaba Investor Meeting: The company's long-term value narrative remains intact, and there is significant undervaluation of the option value in its valuation.

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Although the investor meeting held after Alibaba’s earnings release reinforced its long-term investment narrative, JPMorgan believes the company’s stock price will remain constrained in the short term by the pace of earnings realization. The bank maintains an “Overweight” rating for Alibaba’s US and Hong Kong stocks, with a US price target of $205 and a Hong Kong price target of HKD 200.

JPMorgan’s research report published on March 24 noted that this meeting helped clarify why management is willing to take short-term profit pressure, and why they believe current investments can generate significant value in the medium term. However, JPMorgan has not become more convinced that valuations can be sharply raised in the near term as a result. The bank believes that over the next three months, Alibaba’s stock price will mainly consolidate, unless subsequent data more clearly shows business momentum improvement and investment intensity becomes more manageable.

The current market environment favors rewarding earnings realization rather than long-term strategic choices. JPMorgan says this meeting alone is not enough to drive a sharp revaluation, but the company’s long-term value narrative remains intact, and the option value implied in the valuation may be underestimated by the market.

AI and Cloud Business: Clear Strategic Focus, Monetization Visibility Still Needs Improvement

Management made it clear at the meeting that AI and cloud business are the top priorities on Alibaba’s strategic agenda and are the company’s most important long-term investment areas. This statement aims to quell market concerns that spending on local services or flash delivery might be encroaching upon AI and cloud resources and strategic focus.

On monetization, management stated that Alibaba has already monetized AI demand, but most of the monetization is currently included in broader cloud revenue and has not yet been disclosed as a standalone AI revenue item. Enterprise customers using AI workloads typically utilize infrastructure, computing power, and related services through standard cloud frameworks. Management expects that as customer usage increases and pricing models evolve, AI monetization will gradually become more visible.

JPMorgan believes this is the most important information from the meeting. Alibaba management wants investors to view cloud business as a broader AI stack, with expanding monetization potential through model services, token consumption, and application layer usage, rather than just seeing it as a traditional infrastructure business. In the medium term, this framework is constructive, but the market needs more explicit evidence—including continued acceleration of cloud business, improved visibility of AI monetization, and confirmation that increased investment will not structurally pressure margins beyond expectations—before assigning a significantly higher valuation multiple.

Full Value Chain AI Layout: Open Source Traffic, Ecosystem Synergy Monetization

Management positions Alibaba’s AI role as far more than just the foundational model layer. Alibaba believes it is broadly involved in infrastructure, cloud hosting, model platforms, enterprise deployment tools, and commercialization, with platforms like Bailian serving as crucial bridges between model capabilities and enterprise applications.

On open-source strategy, management has a pragmatic attitude: the core value of open-source models is to boost influence, attract developers, and expand usage; its commercial logic is to channel traffic to Alibaba’s full-stack system, thereby monetizing through hosting services, enterprise-grade tools, and cloud services, rather than being a direct profit source.

Notably, management emphasized that third-party AI model companies should not simply be seen as competitive threats. Many such players still need cloud infrastructure, training and inference capabilities, and channels to reach enterprise customers—Alibaba can cooperate as a cloud service provider, platform enabler, or distribution partner. Management also noted that AI demand is expanding from a few large internet companies to wider industries and enterprise clients, who are shifting from experimental stages to more routine, deeply embedded use cases, which is crucial for sustained cloud and AI revenue.

Additionally, management stated that Alibaba Cloud’s operating environment is no longer simply scale-driven. Pricing discipline is gradually forming, and price adjustments will be carried out in an orderly manner via renewals and new contracts, rather than abrupt or broad price hikes.

Flash Delivery Business: Ecosystem Value Underestimated, Loss Reduction Timeline Still Unclear

Management spent considerable time at the meeting explaining that instant retail business should not be evaluated solely from the short-term loss perspective. This business is positioned as a strategic tool for enhancing user frequency, engagement, category coverage, and consolidating the user ecosystem. Its investment logic is partly driven by ecosystem synergy effects, rather than pursuit of standalone profit.

JPMorgan believes this strategic positioning is logically sound and may be underestimated by the market. If management is correct, current flash delivery losses are actually helping Alibaba fortify its business moat, rather than merely expanding low-quality GMV.

However, the challenge is that this remains a medium-term stock view, while the stock is still trading on short-term earnings adjustments. Management is more confident in operational logic to ultimately achieve improvement than in giving clear short-term timing, focusing on building scale, increasing order density, and optimizing category structure rather than shrinking investment to forcibly raise short-term margins. JPMorgan notes investors will continue to watch three issues: the speed of unit economics improvement, sustainability of user growth, and when ecosystem value will appear more clearly in reported financial data.

Market Pricing Ignores Cloud Business and Flash Delivery Option Value

JPMorgan points out that the current market pricing of Alibaba seems to base the company’s valuation solely on domestic e-commerce business profits. The bank estimates that the current valuation is about 10 times JPMorgan’s forecasted 196 billion RMB domestic e-commerce profit for FY2027, while for the cloud intelligence group’s 36% YoY revenue growth, AI product triple-digit growth for ten consecutive quarters, and the instant retail platform progressing towards the management’s FY2028 GMV target of 1 trillion RMB, the market assigns zero residual value.

JPMorgan disagrees with this. The bank believes that if the $100 billion cloud revenue target is achieved and reasonably valued, cloud business alone could be worth $400 billion, but this potential is not reflected in the current share price.

The bank maintains Alibaba’s US stock price target at $205, based on 16x FY2028 expected P/E, and adopts sum-of-the-parts as a second valuation method: 14x FY2026 expected calendar year P/E for core e-commerce profit, 6x FY2026 expected calendar year P/S for cloud business. Key downside risks include: competition from major internet firms like Tencent and Baidu in local life services; prolonged digital content investment cycles’ continuous margin pressure; and slower-than-expected improvement in mobile business monetization.

Risk Warning and DisclaimerThe market has risks, and investment needs caution. This article does not constitute personal investment advice and does not take into account any user's specific investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein fit their specific circumstances. Investment based on this article is at your own risk. ```