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Alibaba Group (BABA) Q3 Earnings: What Awaits the Stock?
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Alibaba Group (BABA - Free Report) is set to report third-quarter fiscal 2017 results on Jan 24. Last quarter, the Chinese e-Commerce giant posted a positive earnings surprise of 34.04%.
Over the past one year, shares of Alibaba Grouphave been steadily treading higher. The stock has returned 39.72% compared with the Zacks categorized Electronic Commerce industry’s gain of 34.65%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Alibaba’s second-quarter fiscal 2017 earnings of 63 cents per share exceeded the Zacks Consensus Estimate of 47 cents. The solid growth in its core e-commerce business as well as growing cloud computing services led to the strong results. Management expects these factors to continue driving results for the upcoming quarter.
Revenues were also up sequentially as well as year over year. The increase was driven by continued revenue growth in China’s commerce retail business and the consolidation of newly acquired businesses (namely Youku Tudou and Lazada).
The Chinese e-Commerce company, which operates as a platform for third-party sellers, neither sell goods directly to merchants nor holds inventory. Alibaba Group’s strong market position in China, uninterrupted growth in mobile business, unfazed improvement in commerce retail business and improving gross merchandise value should boost fiscal third-quarter earnings.
Additionally, Alibaba is expected to continue witnessing increase in monetization rates. The company is building up its online marketing inventory on both mobile and PC. Also due to higher monetization rate, its profits are too expected to go up.
However, the company has been making huge investments in varied growth initiatives. This could impact profits to some extent in the near term. Also, macro headwinds and increasing competition could dampen the upcoming results.
Earnings Whispers
Our proven model does not show that Alibaba Groupwill beat on earnings this fiscal quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 85 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Alibaba Group has a Zacks Rank #3. However, a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Microsoft Corporation (MSFT - Free Report) , with an Earnings ESP of +1.28% and Zacks Rank #2.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Alibaba Group (BABA) Q3 Earnings: What Awaits the Stock?
Alibaba Group (BABA - Free Report) is set to report third-quarter fiscal 2017 results on Jan 24. Last quarter, the Chinese e-Commerce giant posted a positive earnings surprise of 34.04%.
Over the past one year, shares of Alibaba Grouphave been steadily treading higher. The stock has returned 39.72% compared with the Zacks categorized Electronic Commerce industry’s gain of 34.65%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Alibaba’s second-quarter fiscal 2017 earnings of 63 cents per share exceeded the Zacks Consensus Estimate of 47 cents. The solid growth in its core e-commerce business as well as growing cloud computing services led to the strong results. Management expects these factors to continue driving results for the upcoming quarter.
Revenues were also up sequentially as well as year over year. The increase was driven by continued revenue growth in China’s commerce retail business and the consolidation of newly acquired businesses (namely Youku Tudou and Lazada).
The Chinese e-Commerce company, which operates as a platform for third-party sellers, neither sell goods directly to merchants nor holds inventory. Alibaba Group’s strong market position in China, uninterrupted growth in mobile business, unfazed improvement in commerce retail business and improving gross merchandise value should boost fiscal third-quarter earnings.
Additionally, Alibaba is expected to continue witnessing increase in monetization rates. The company is building up its online marketing inventory on both mobile and PC. Also due to higher monetization rate, its profits are too expected to go up.
However, the company has been making huge investments in varied growth initiatives. This could impact profits to some extent in the near term. Also, macro headwinds and increasing competition could dampen the upcoming results.
Earnings Whispers
Our proven model does not show that Alibaba Groupwill beat on earnings this fiscal quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 85 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Alibaba Group has a Zacks Rank #3. However, a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Alibaba Group Holding Ltd. Price and EPS Surprise
Alibaba Group Holding Ltd. Price and EPS Surprise | Alibaba Group Holding Ltd. Quote
Stocks to Consider
You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
Corning Incorporated (GLW - Free Report) , with an Earnings ESP of +6.98% and a Zacks Rank #2.
Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +1.87% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Microsoft Corporation (MSFT - Free Report) , with an Earnings ESP of +1.28% and Zacks Rank #2.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>