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

Zacks Equity Research

Alibaba (BABA) closed the most recent trading day at $177.03, moving -0.96% from the previous trading session. This move lagged the S&P 500's daily loss of 0.16%. Elsewhere, the Dow gained 0.11%, while the tech-heavy Nasdaq lost 0.44%.

Coming into today, shares of the online retailer had gained 4.59% in the past month. In that same time, the Retail-Wholesale sector gained 4.42%, while the S&P 500 gained 4%.

Wall Street will be looking for positivity from BABA as it approaches its next earnings report date. The company is expected to report EPS of $1.51, up 23.77% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $16.53 billion, up 35.17% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $6.72 per share and revenue of $74.48 billion, which would represent changes of +17.48% and +33.92%, respectively, from the prior year.

Any recent changes to analyst estimates for BABA should also be noted by investors. Recent revisions tend to reflect the latest near-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. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.36% higher. BABA is holding a Zacks Rank of #2 (Buy) right now.

Valuation is also important, so investors should note that BABA has a Forward P/E ratio of 26.61 right now. This valuation marks a discount compared to its industry's average Forward P/E of 27.99.

We can also see that BABA currently has a PEG ratio of 0.99. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Internet - Commerce stocks are, on average, holding a PEG ratio of 1.88 based on yesterday's closing prices.

The Internet - Commerce industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 63, putting it in the top 25% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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