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

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

In the latest trading session, Alibaba (BABA) closed at $147.44, marking a +1.94% move from the previous day. This change outpaced the S&P 500's 0.63% gain on the day. Meanwhile, the Dow gained 0.68%, and the Nasdaq, a tech-heavy index, added 0.64%.

Prior to today's trading, shares of the online retailer had lost 4.3% over the past month. This has lagged the Retail-Wholesale sector's loss of 3.45% and was narrower than the S&P 500's loss of 4.95% in that time.

Investors will be hoping for strength from BABA as it approaches its next earnings release, which is expected to be February 7, 2019. In that report, analysts expect BABA to post earnings of $1.80 per share. This would mark year-over-year growth of 10.43%. Meanwhile, our latest consensus estimate is calling for revenue of $17.74 billion, up 38.98% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.32 per share and revenue of $55.58 billion. These totals would mark changes of +1.53% and +45.04%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for BABA. These revisions typically reflect the latest short-term business trends, which can change frequently. 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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an 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. The Zacks Consensus EPS estimate has moved 6.01% lower within the past month. BABA is currently a Zacks Rank #3 (Hold).

Investors should also note BABA's current valuation metrics, including its Forward P/E ratio of 27.2. This represents a discount compared to its industry's average Forward P/E of 29.53.

Investors should also note that BABA has a PEG ratio of 0.79 right now. 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 2.22 as of yesterday's close.

The Internet - Commerce industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 105, which puts it in the top 41% 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.

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


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