East Asia Securities has released a research report lowering its target price for Alibaba-W (09988) (BABA.US) from HK$156 to HK$150, a reduction of 3.8%, while maintaining its Buy investment rating.

East Asia Securities said it is optimistic about Alibaba's medium- to long-term development. The company is gradually transforming from a leading traditional e-commerce platform into a technology enterprise driven by dual engines of e-commerce cash flow and full-stack AI.

With large models, in-house chips and cloud infrastructure advancing in tandem, the company's enterprise-level AI competitiveness is expected to be continuously strengthened. Proceeds from its earlier share placement will be fully invested in the full-stack AI buildout, which the brokerage views as strategic financing to support future growth rather than a reflection of funding pressure.

Although short-term growth in the e-commerce business remains relatively weak, the unit economics of instant retail continue to improve, and the core business is expected to gradually stabilize.

Currently, Alibaba's forward price-to-earnings ratio for the next 12 months is 14.1 times, below its average over the past 10 years of 18.6 times and still at a substantial discount to AI cloud companies listed in Europe and the United States.

As national policies continue to support the development of the AI industry and AI application scenarios increase, the valuation of the group's cloud and Model-as-a-Service (MaaS) businesses is expected to have room for further upward revision, and the potential spin-off listing of its T-Head chip business also supports a recovery in the group's valuation.

Accordingly, East Asia Securities assigns Alibaba a target price-to-earnings ratio of 23 times for fiscal 2027, and adds a fiscal 2027 adjusted earnings per share forecast of RMB5.4 for the group.