Alibaba risks deepening its $100 billion defeat as the Turf War heats up

Hong Kong-listed stocks have plummeted 28% from their March highs since Thursday, nearly double the losses on the gauges of China’s high tech piers. Rivals JD.com Inc. and Meituan were removed by similar measures in daily headlines about government efforts to call the destructive hyper-competition a “retreatment.”

At least four brokers, including Goldman Sachs Group Inc. and HSBC Holdings Plc, have lowered their price targets of an average of 8% since late June.

“It could last longer than expected,” said Luo Jing, investment director at Value Partners Group Ltd. in Hong Kong. “Players are economically stronger than the previous round, with more cash and better cash flow positions.”

Alibaba’s food distribution strategy has diverted investors from the Deepseek-led AI boom, which won over 80% in the last two months this year. The company has integrated delivery units into its core business and has boosted subsidies since its official JD.com entry In the February space.

It’s a costly battle. Nomura Holdings Inc. estimates that around $4 billion was burned at a discount in the June quarter alone by Alibaba, Meituan and JD.com. It sees Alibaba determine the strength and scale of the upcoming coupon war.

Sector leader Meituan said he would enter “attack” mode against Alibaba on Saturday, and JD.com announced a new incentive scheme this week. The corporate extremes have attracted a lot of criticism from the government for its disastrous impact on the industry, as well as warnings about driver health and food safety.

Alibaba could maintain a loss of 41 billion yuan ($5.7 billion) in its food delivery business for the 12 months ending next June, according to Goldman Sachs, which represents about a third of its net profit for the fiscal year ended March.

“Insta Shopping, an aggressive investment in food delivery, will keep our short-term revenue outlook meaningful,” said HSBC analysts, including Charlene Liu, cut Alibaba’s price target by 15% this week.

Alibaba’s 12-month forward earnings consensus estimates have fallen by about 6% since early May. Analysts remain overwhelmingly bullish, with Hong Kong stocks with a buy rating of 44 and no holdings or sales. Additionally, stock prices remain historically cheap at a price-to-revenue ratio of less than 11 times.

Regarding Uspide’s risks, Julia Pan, analyst Uob Kay Hian Holdings Ltd., notes that the government can do it I’ll step in If the market gets hit hard and the margins are further narrowed, it will curb price competition. Alibaba’s current rating is low enough to cause some dip purchases, she added.

Shares rose 3.5% on Friday amid a wider rally in Hong Kong.

However, investors may be cautious until the decisive end of a sudden discount, especially when it causes more revenue downgrades and constrains investments in a very important AI business.

“We need to be aware of price competition that evolves into a situation in which certain companies decide to gain market share at the expense of profitability,” says Nicholastuy, Franklin Templeton Portfolio Manager. “As an inventory picker, we’ll avoid those stocks.”