Alibaba to rally 40 percent-plus on its emerging cloud computing business, Morgan Stanley says

Adam Jeffery | CNBC

Morgan Stanley analyst Grace Chen assumed coverage of Alibaba shares with an overweight rating, saying investors are underestimating the potential of the company's AliCloud business.

"We believe the market in general still views Alibaba as a traditional e-commerce company, as this remains the major profit driver, while its efforts to upgrade the e-commerce business and invest in other strategic initiatives (i.e. AliCloud) are underappreciated," Chen wrote in a note to clients Wednesday.

"For example, given the strong growth in AliCloud, the future revenue and profit mix could be materially different from what it is now."