Here's Why Alibaba (BABA) Fell More Than Broader Market

Alibaba (BABA) closed the most recent trading day at $126.81, moving -1.34% from the previous trading session. The stock trailed the S&P 500, which registered a daily loss of 0.18%. At the same time, the Dow lost 0.85%, and the tech-heavy Nasdaq lost 0.06%.

The online retailer's stock has climbed by 17.94% in the past month, exceeding the Retail-Wholesale sector's gain of 7.23% and the S&P 500's gain of 3.33%.

The investment community will be closely monitoring the performance of Alibaba in its forthcoming earnings report. On that day, Alibaba is projected to report earnings of $1.94 per share, which would represent a year-over-year decline of 5.83%. Meanwhile, the latest consensus estimate predicts the revenue to be $38.63 billion, indicating a 11.74% increase compared to the same quarter of the previous year.

For the annual period, the Zacks Consensus Estimates anticipate earnings of $6.91 per share and a revenue of $167.62 billion, signifying shifts of +77.63% and +15.28%, respectively, from the last year.

Investors should also note any recent changes to analyst estimates for Alibaba. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. The Zacks Consensus EPS estimate has moved 0.73% higher within the past month. Alibaba is currently sporting a Zacks Rank of #3 (Hold).

In the context of valuation, Alibaba is at present trading with a Forward P/E ratio of 18.6. This represents a premium compared to its industry average Forward P/E of 18.32.

It's also important to note that BABA currently trades at a PEG ratio of 2.15. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. The Internet - Commerce industry currently had an average PEG ratio of 1.21 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 155, which puts it in the bottom 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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 use Zacks.com to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions.

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This article originally published on Zacks Investment Research (zacks.com).

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