Alibaba (BABA) Falls More Steeply Than Broader Market: What Investors Need to Know

In the latest close session, Alibaba (BABA) was down 2.17% at $122.69. The stock's performance was behind the S&P 500's daily loss of 1.67%. Elsewhere, the Dow lost 1.73%, while the tech-heavy Nasdaq lost 2.15%.

Prior to today's trading, shares of the online retailer had lost 15.29% lagged the Retail-Wholesale sector's loss of 4.2% and the S&P 500's loss of 6.15%.

The upcoming earnings release of Alibaba will be of great interest to investors. The company is expected to report EPS of $1.53, down 11.56% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $35.35 billion, up 8.49% from the year-ago period.

For the entire fiscal year, the Zacks Consensus Estimates are projecting earnings of $5.26 per share and a revenue of $148.66 billion, representing changes of -41.62% and +7.62%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for Alibaba. Such recent modifications usually signify the changing landscape of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-term 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, running from #1 (Strong Buy) to #5 (Strong Sell), holds an admirable track record of superior performance, independently audited, with #1 stocks contributing an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 13.8% downward. Alibaba presently features a Zacks Rank of #5 (Strong Sell).

Valuation is also important, so investors should note that Alibaba has a Forward P/E ratio of 23.86 right now. For comparison, its industry has an average Forward P/E of 15.38, which means Alibaba is trading at a premium to the group.

It's also important to note that BABA currently trades at a PEG ratio of 2.76. 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. Internet - Commerce stocks are, on average, holding a PEG ratio of 0.9 based on yesterday's closing prices.

The Internet - Commerce industry is part of the Retail-Wholesale sector. With its current Zacks Industry Rank of 175, this industry ranks in the bottom 29% of all industries, numbering over 250.

The Zacks Industry Rank evaluates the power of our distinct industry groups by determining the average Zacks Rank of the individual stocks forming the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.

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

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