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Alibaba (BABA) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
BlackBerry (BB) closed the most recent trading day at $8.84, moving -1.34% from the previous trading session.

Alibaba (BABA) closed at $148.14 in the latest trading session, marking a -0.98% move from the prior day. This change lagged the S&P 500's daily loss of 0.03%. At the same time, the Dow lost 0.36%, and the tech-heavy Nasdaq lost 0.04%.

Coming into today, shares of the online retailer had lost 4.5% in the past month. In that same time, the Retail-Wholesale sector lost 7.72%, while the S&P 500 lost 3.08%.

Investors will be hoping for strength from BABA as it approaches its next earnings release, which is expected to be November 2, 2018. On that day, BABA is projected to report earnings of $1.16 per share, which would represent a year-over-year decline of 10.08%. Meanwhile, our latest consensus estimate is calling for revenue of $12.69 billion, up 53.14% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.41 per share and revenue of $57.24 billion, which would represent changes of +3.24% and +49.37%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for BABA. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 8.44% lower within the past month. BABA currently has a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that BABA has a Forward P/E ratio of 27.68 right now. Its industry sports an average Forward P/E of 27.23, so we one might conclude that BABA is trading at a premium comparatively.

We can also see that BABA currently has a PEG ratio of 0.8. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BABA's industry had an average PEG ratio of 2.08 as of yesterday's close.

The Internet - Commerce industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 106, putting it in the top 42% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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