Shares of Alibaba BABA have surged 32% this year to outpace the S&P 500’s 15% climb and its U.S. e-commerce rival Amazon AMZN. Now it’s time to see if investors should consider buying Alibaba stock ahead of its Q4 and full-year fiscal 2019 financial results that are due out on Wednesday, May 15.
Last quarter, Alibaba’s revenue grew at its slowest pace since 2016 on the back of a slowing Chinese economy that has continued to hurt some of the biggest companies in the world, including Apple AAPL. Progress toward a resolution in the trade war between the U.S. and China had seemingly been made since then. But this week saw markets dip on renewed fears that an agreement between the world’s two largest economies won’t be reached.
Nonetheless, Alibaba still operates the biggest two e-commerce platforms in China. Alibaba’s core digital commerce business, highlighted by Taobao and Tmall, accounted for roughly 87% of the company’s quarterly revenues last period. Alibaba, like Amazon, has also diversified its business beyond online sales into cloud computing in an effort to compete against Microsoft MSFT, IBM IBM, Google GOOGL. Meanwhile, Alibaba bolstered its digital media and entertainment businesses, which includes deals with Disney DIS and others, in the Netflix NFLX age.
As we touched on at the top, BABA stock has surged roughly 32% in 2019. Despite the climb, shares of Alibaba are still down 8% over the 12 months. Alibaba stock currently sits at around $180 per share through late afternoon trading Wednesday, which marks a 15% downturn compared to its 52-week high.
Outlook & Earnings Trends
Looking ahead, Alibaba’s quarterly revenue is projected to jump 36.6% from the year-ago period to hit $13.49 billion, based on our current Zacks Consensus Estimate. This would mark a slowdown from the December quarter’s 41% top-line expansion and Q2’s 54% top-line growth. It is worth noting that BABA faces a difficult comparison to the prior-year quarter’s 61% revenue growth. And massive year over year growth always becomes more difficult to achieve as companies start to pull in Alibaba-type money.
Moving onto the bottom end of the income statement, BABA’s adjusted quarterly earnings are projected to surge 15.4% to reach $1.05 per share. Meanwhile, the firm’s full-year 2019 earnings are expected to climb 4.2% to $5.46 per share.
Investors should remember that Alibaba is still a tech growth play, with the company focused more on expansion than earnings at this point. Plus, the company’s earnings estimate revisions picture has trended more heavily in the wrong direction recently.
With that said, the company’s adjusted fiscal 2020 EPS figure is projected to come in nearly 20% higher than our 2019 estimate in the following year. On top of that, the company’s fiscal 2020 revenues are expected to surge 35.5% above our current-year estimate to reach $74.98 billion.
Alibaba is a Zacks Rank #3 (Hold) right now based, in large part, on the negative earnings estimate revision activity. On top of that, BABA’s growth appears to be coming down compared to recent periods and its price/sales ratio rests at 9, which marks a huge premium compared to its industry’s 2.1 average.
In the end, Alibaba is still a growth stock at the moment and its forward P/E marks a massive discount to its American counterpart Amazon. But with BABA stock up big so far this year, it might be best to wait and see how the company performs and how Wall Street reacts, especially as trade war worries escalate.
Alibaba is scheduled to release its March quarter and full year 2019 financial results on Wednesday, May 15. Make sure to come back to Zacks for a complete breakdown of the firm’s actual quarterly earnings results.
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