Morningstar has issued a research report stating it maintains its fair value estimate for wide-moat Alibaba (09988, BABA.US) at HK$251 for its Hong Kong-listed shares and $258 for its US-listed shares. The stock currently appears undervalued, with the market seemingly overestimating the short-term profit pressure from investments in artificial intelligence (AI) and quick commerce while underestimating the potential growth from AI monetization. Morningstar indicated that Alibaba aims for its cloud computing and AI businesses to achieve a compound annual growth rate in external revenue exceeding 40% over the next five years, reaching RMB 690 billion, with a long-term adjusted EBITA margin improving to 20%. The company anticipates its quick commerce business will achieve positive cash flow in fiscal year 2028 (ending March) and turn a profit in fiscal 2029. The research firm maintains its forecast for Alibaba's cloud revenue to reach RMB 6.56 trillion in fiscal 2031 and its expectation for a 20% adjusted EBITA margin by fiscal 2035, aligning with Alibaba's targets. This robust growth is expected to be primarily driven by AI cloud services, Model-as-a-Service (MaaS) products, and AI applications. Morningstar believes Alibaba is well-positioned to achieve its quick commerce objectives. Based on company guidance, the firm has moved its projected break-even timeline forward by one year to fiscal 2029. Alibaba is expected to continue expanding its share of Gross Merchandise Value (GMV) in the quick commerce sector, increase average order value, and enhance profit per order. While last quarter's adjusted EBITA fell short of expectations, Morningstar has largely maintained its medium-term adjusted EBITA outlook, reflecting continued optimism about Alibaba's long-term prospects. The report concludes that sacrificing short-term profitability is a strategically sound decision to secure a long-term leading position in China's AI and quick commerce markets.