Alibaba Faces Margin Pressure Amid Rising Competition, AI Ambitions Soar

Alibaba is facing margin pressure due to rising competition in China's local commerce sector. Analysts have lowered their price target, citing concerns over profit margins. However, the company remains committed to maintaining its market share through subsidies. Alibaba has also unveiled its latest open-source AI model and is making strides in its cloud and AI businesses, which are seen as key growth drivers.

Chinese e-commerce giant Alibaba Group Holding Limited (NYSE: BABA) is under scrutiny following a recent report by Mizuho's top analyst, Jason Helfstein, who lowered the price target for the stock from $160 to $149 due to growing concerns around profit margins [2]. The analyst cited rising competition in China's local commerce sector, particularly in food delivery and instant retail, as the primary cause of margin pressure.

Alibaba's push to stay competitive in the local commerce sector has led to a sharp drop in margins during the first quarter of 2026. Mizuho's forecast for the June-quarter EBITDA has been revised down from 55 billion RMB to 45 billion RMB, and the FY27 EBITDA estimate has been lowered to 231 billion RMB [2]. The company has responded by announcing a 50 billion yuan ($7 billion) subsidy program via its Taobao unit to support food delivery and online retail services [2].

Despite the margin strain, Alibaba remains confident in its long-term outlook and maintains an "Outperform" rating on the stock. The company has also made significant strides in its cloud and AI businesses, which are seen as key growth drivers. Recently, Alibaba unveiled its latest open-source AI model, further cementing its position in the tech industry [1].

Institutional investors and hedge funds have also made notable changes to their positions in Alibaba stock. Bank Julius Baer & Co. Ltd Zurich increased its position by 134.5% in the first quarter, owning 27,298 shares valued at $3,610,000 [1]. Meanwhile, Ridgewood Investments LLC reduced its stake by 32.5%, now holding 11,644 shares valued at $1,540,000 [3]. Other institutional investors have also bought and sold shares of the company, reflecting the ongoing interest in Alibaba's stock.

Analysts remain highly bullish about Alibaba's stock trajectory, with 14 Buy ratings and one Hold rating, commanding a Strong Buy consensus rating on TipRanks [2]. The average Alibaba price target of $151.81 implies about 25.31% upside potential from current levels [2].

References:
[1] https://www.marketbeat.com/instant-alerts/filing-bank-julius-baer-co-ltd-zurich-purchases-15656-shares-of-alibaba-group-holding-limited-nysebaba-2025-07-24/
[2] https://www.tipranks.com/news/margins-could-get-worse-warns-top-analyst-about-alibaba-stock-baba-ahead-of-q1-earnings
[3] https://www.marketbeat.com/instant-alerts/filing-ridgewood-investments-llc-cuts-holdings-in-alibaba-group-holding-limited-nysebaba-2025-07-27/