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Alibaba (BABA) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
Wabco (WBC) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Alibaba (BABA) closed at $186.48 in the latest trading session, marking a +0.61% move from the prior day. The stock outpaced the S&P 500's daily gain of 0.11%. Meanwhile, the Dow lost 0.32%, and the Nasdaq, a tech-heavy index, added 0.19%.

Heading into today, shares of the online retailer had gained 4.53% over the past month, outpacing the Retail-Wholesale sector's gain of 3.62% and the S&P 500's gain of 3.84% in that time.

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 $1.07, up 17.58% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $13.50 billion, up 36.76% from the year-ago period.

It is also important to note the recent changes to analyst estimates for BABA. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about 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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. BABA is holding a Zacks Rank of #3 (Hold) right now.

Looking at its valuation, BABA is holding a Forward P/E ratio of 27.35. For comparison, its industry has an average Forward P/E of 27.71, which means BABA is trading at a discount to the group.

Investors should also note that BABA has a PEG ratio of 0.97 right now. 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 2.16 based on yesterday's closing prices.

The Internet - Commerce industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 203, which puts it in the bottom 21% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow BABA in the coming trading sessions, be sure to utilize Zacks.com.


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