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

Zacks Equity Research
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Alibaba (BABA) closed at $151.69 in the latest trading session, marking a -0.15% move from the prior day. This move lagged the S&P 500's daily gain of 0.45%. At the same time, the Dow added 0.51%, and the tech-heavy Nasdaq gained 0.42%.

Prior to today's trading, shares of the online retailer had gained 0.28% over the past month. This has outpaced the Retail-Wholesale sector's gain of 0.15% and the S&P 500's loss of 1.64% in that time.

BABA will be looking to display strength as it nears its next earnings release, which is expected to be February 7, 2019. On that day, BABA is projected to report earnings of $1.64 per share, which would represent year-over-year growth of 0.61%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $17.25 billion, up 35.18% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.18 per share and revenue of $59.17 billion. These totals would mark changes of -1.15% and +54.4%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for BABA. 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.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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 remained stagnant within the past month. BABA is holding a Zacks Rank of #3 (Hold) right now.

Investors should also note BABA's current valuation metrics, including its Forward P/E ratio of 29.32. For comparison, its industry has an average Forward P/E of 30.99, which means BABA is trading at a discount to the group.

Investors should also note that BABA has a PEG ratio of 0.94 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 1.98 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 88, which puts 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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