Goldman Sachs has issued a research report stating that the current valuation of Alibaba-W (09988) does not fully reflect its comprehensive AI strategy and international cloud potential. The firm anticipates that the group will increase investments in AI for both enterprise and consumer sectors over the next 12 to 24 months while achieving double-digit profit growth. The bank maintains a "Buy" rating on Alibaba and places it on its Asia Pacific "Conviction Buy List," with a 12-month target price of HK$180. The target price for Alibaba (BABA.US) shares is $186.
The first day of the Alibaba Cloud Summit in Hangzhou, coupled with the Chairman and CEO's letter to shareholders released on the same day, indicates the group is entering a new phase of significant investment in the era of AI agents. Management emphasized that the industry is at a crucial inflection point in the development of Artificial General Intelligence (AGI). A large number of AI agents, driven by model-generated tokens, will take on a greater share of work and become the primary interface between humans and the digital world.
The bank believes that a series of AI agent products can support Alibaba's recently announced Model-as-a-Service (MaaS) Annual Recurring Revenue (ARR) targets, aiming to reach RMB 10 billion in the June quarter and RMB 30 billion by the end of fiscal year 2027.
Goldman Sachs expects Alibaba's earnings per share to recover with year-on-year growth of 32% and 54% in fiscal years 2027 and 2028, respectively. This growth is primarily driven by its leading position in China's AI and cloud businesses, an acceleration in cloud growth, and a narrowing of losses in quick commerce over the coming quarters.
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