Alibaba (BABA) Stock Drops 5% as $10B Share Sale Raises Questions About Cash Use

TLDR

• Bernstein SocGen cut its BABA price target to $165 from $180, while keeping an Outperform rating
• Alibaba stock has dropped about 5% since announcing a $10.2 billion equity raise on Aug. 23
• Investors questioned why Alibaba raised new capital when it already held $30.7 billion in net cash
• Bernstein’s analysis shows AI chip investments could pay back in 2.5 to 3 years
• Wall Street holds a Strong Buy consensus on BABA with an average price target of $189.46

Alibaba (BABA) stock is trading at $113.24, down roughly 5% since the company announced a $10.2 billion equity raise on Aug. 23 to fund its AI expansion.

Alibaba Group Holding Limited, BABA

Bernstein SocGen analyst Robin Zhu acknowledged investor frustration and cut his price target on BABA to $165 from $180, a reduction of about 8%. He kept his Outperform rating on the stock.

Zhu said it is “not hard to sympathise” with investors who are unhappy with the deal. The core complaint is straightforward: why raise new capital when the company already holds $30.7 billion in net cash?

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