Alibaba Stock: Why the Price Jumps (and What They're Not Telling You)
Alibaba: All That AI Hype Can't Mask the Rot, Can It?
Alright, let's talk about Alibaba, because apparently, the market's got this collective amnesia, or maybe it's just really good at sniffing out the next shiny object. We're seeing BABA stock jump, rallying a whopping 82% over the past year, 89% year-to-date. Why? "Confidence in China tech improves," they say. And a "stabilizing" main shopping business. Give me a break. You know what stabilizes things? Actual, consistent, growing profits, not just a bunch of analyst hand-waving.
Bank of America's Joyce Ju, bless her heart, she's still clinging to a "Buy" rating. But then, in the same breath, she slices the price target from $200 to $188. Think about that for a second. It's like telling someone, "Yeah, that car's a great buy! Just, uh, we're gonna knock a few grand off the sticker price because the engine's sputtering a bit." It ain't exactly a ringing endorsement, is it? She's pointing to "softer near-term growth in e-commerce." So, the thing Alibaba is known for, the thing that built the empire, that's wobbling. But hey, don't worry, there's a new distraction on the block.
The AI Mirage and the Money Pit
Here's the real story, the one they hope you'll gloss over: Alibaba's Q2 FY26 earnings. Revenue hit 247.8 billion yuan, or $34.8 billion, which, okay, was up 5% year-over-year and beat expectations. Good for them. But then you look at the adjusted diluted EPS: 4.36 yuan. Consensus was 6.34 yuan. That's not just a miss; that's like showing up to a party with a six-pack when everyone was expecting a full keg. And guess what else went south? Cash flow. Why? Because Alibaba's throwing money at AI, cloud, and quick commerce like a drunken sailor on shore leave. They're talking about spending $53 billion over three years on AI infrastructure, and CEO Eddie Wu is already saying they'll blow past that because demand "exceeded expectations." Sure, buddy. Or maybe, just maybe, it's a bottomless pit.
They're trying to pivot, hard, into this AI game, pushing their Qwen app as some kind of OpenAI killer. Ten million downloads in a week, they brag. That's a lot of clicks, no doubt. But downloads don't automatically translate to sustainable revenue, do they? We've seen this movie before, countless times. Every company with a pulse suddenly becomes an "AI company," and the market goes wild. It’s like a gold rush, but instead of actual gold, everyone's just digging up more shovels and calling them "disruptive innovations." What happens when the dust settles, and these AI tools actually have to make money, not just consume it? Are we really supposed to believe that this massive investment in AI, while their core business is slowing, is a stroke of genius and not a desperate gamble? I mean, what's the actual, tangible return on investment for all this AI hubbub beyond making good press releases?
And don't even get me started on "quick commerce." Ju says the losses are "improving." Improving! It's still a 36-37 billion yuan loss, just "better than expected." That's like saying your broken leg is "improving" because it only hurts most of the time now. Management thinks losses will drop by half next quarter. Well, JD.com, one of their main rivals, is reportedly reducing spending on its quick delivery business. Someone's gotta be right, and I've got a hunch it ain't the one still bleeding billions. It's a classic case of chasing market share at any cost, hoping one day the magic money tree will bloom. News flash: sometimes, you just end up with a very expensive, very dead plant.
The Cracks in the Core, and Why No One Cares
So, while the cloud business is indeed showing some real muscle – 34% growth, beating estimates, AI-related revenue exploding – the analyst still had to cut earnings forecasts for the entire company by 7% to 20% through FY28. Why? Because the main event, the e-commerce business, is expected to slow down. Customer management revenue (CMR), the stuff they get from merchant ads and fees, is looking soft. They can talk about "improving user traffic and engagement" all they want, but if those users aren't spending, or if the ad dollars dry up, what good is it? It's like having a packed stadium for a concert, but no one's buying merchandise or concessions. The crowd's there, but the cash register's silent.
This is where the whole "bullish" consensus on BABA stock starts to feel like a house of cards built on wishful thinking and AI vaporware. Nineteen Buy ratings, two Hold ratings, and an average price target that implies 25% upside? Despite a real earnings miss, a price target cut by a major analyst, and a core business that's slowing? This ain't adding up for me. It feels like everyone's just looking at the `baba stock price` going up and assuming there's a good reason, even if the fundamentals are screaming something else. Maybe I'm just an old cynic, but when do we stop cheering for potential and start demanding actual, cold, hard profits? This whole thing feels like a big game of musical chairs, and I'm just waiting for the music to stop, leaving a lot of folks without a seat.