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

Zacks Equity Research

In the latest trading session, Alibaba (BABA) closed at $159.12, marking a -1.91% move from the previous day. This move lagged the S&P 500's daily loss of 0.66%. Elsewhere, the Dow lost 0.34%, while the tech-heavy Nasdaq lost 1%.

Coming into today, shares of the online retailer had lost 2.6% in the past month. In that same time, the Retail-Wholesale sector lost 1.94%, while the S&P 500 lost 1.1%.

BABA will be looking to display strength as it nears its next earnings release, which is expected to be August 15, 2019. The company is expected to report EPS of $1.50, up 22.95% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $16.57 billion, up 35.54% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $6.66 per share and revenue of $74.50 billion. These totals would mark changes of +16.43% and +33.95%, respectively, from last year.

Any recent changes to analyst estimates for BABA should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. 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.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 1.08% lower within the past month. BABA is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that BABA has a Forward P/E ratio of 24.35 right now. This represents a discount compared to its industry's average Forward P/E of 24.85.

Investors should also note that BABA has a PEG ratio of 1.1 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Internet - Commerce was holding an average PEG ratio of 1.68 at yesterday's closing price.

The Internet - Commerce industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 89, putting it in the top 35% 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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