Alibaba (BABA): Understanding the Trending Stock
Alibaba Group Holding Limited (BABA) has recently garnered significant attention on Zacks.com. This article examines factors that may influence the stock's near-term performance and provides insights into its current standing.
Recent Performance and Industry Context
Over the past month, Alibaba's shares have increased by +27.9%, significantly outperforming the Zacks S&P 500 composite's +2.3% change. The Zacks Internet - Commerce industry, which includes Alibaba, experienced a gain of 5.1% during the same period. This begs the question: What's next for the stock?
The Role of Earnings Estimate Revisions
While short-term price changes can be triggered by media buzz, fundamental analysis focusing on earnings projections plays a crucial role in long-term investment decisions. At Zacks, a key priority is evaluating changes in a company's earnings estimates, as they believe the fair value of a stock reflects the present value of its future earnings.
Analysts revise earnings estimates to reflect current business trends. An increase in earnings estimates usually raises the stock's fair value, potentially attracting investors and driving the price upward. Empirical data support a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
Alibaba's Earnings Outlook
For the current quarter, Alibaba is projected to report earnings of $1.03 per share, marking a year-over-year decrease of -52.1%. Over the last 30 days, the Zacks Consensus Estimate has been revised downwards by -38.1%.
The current fiscal year's consensus earnings estimate stands at $8.09, indicating a year-over-year reduction of -10.2%. This estimate has been adjusted downwards by -5.7% over the past 30 days.
Looking ahead to the next fiscal year, the consensus earnings estimate is $10.73, projecting a substantial +32.7% increase from the expected earnings of the previous year. This estimate has increased slightly, by +1.1%, over the past month.
Zacks Rank and Near-Term Outlook
The Zacks Rank, a proprietary stock rating tool, leverages earnings estimate revisions to gauge a stock's near-term price performance. Based on recent changes in the consensus estimate and related factors, Alibaba currently holds a Zacks Rank #3 (Hold).
