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Time to Buy Alibaba (BABA) or Block (SQ) Stock with Earnings Approaching?
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This shortened week of trading will be highlighted by internet and technology services companies Alibaba (BABA - Free Report) ) and Block’s (SQ - Free Report) ) quarterly reports.
Let’s see if it’s time for investors to gear up and buy these popular tech stocks with their earnings approaching.
The reopening of China’s economy provided a strong catalyst for Chinese stocks, but more upside in Alibaba stock very much depends on its fiscal third-quarter report on Thursday, February 23.
After impressive rallies, Chinese stocks including BABA have cooled off recently on concerns that pricing wars upon China’s reopening could dilute margins with Alibaba and E-Commerce rival JD.com (JD - Free Report) ) perfect examples of this scenario.
With that being said, Alibaba stock sports a Zacks Rank #2 (Buy) heading into its quarterly release with earrings estimate revisions trending higher throughout the quarter.
Image Source: Zacks Investment Research
Q3 Preview & Outlook
Alibaba’s Q3 earnings are projected at $2.29 per share, down -13% from Q3 2022 EPS of $2.65 a share. However, the Zacks Expected Surprise Prediction (ESP) indicates Alibaba could beat bottom-line expectations with the Most Accurate Estimate having Q3 EPS at $2.52. On the top line, third-quarter sales are expected to be $35.36 billion, down -7% from the prior year quarter.
Image Source: Zacks Investment Research
Overall, Alibaba’s earnings are now forecasted to dip -12% to $7.31 a share for fiscal 2023 compared to EPS of $8.31 in 2022. Fiscal 2024 earnings are projected to rebound and climb 14% to $8.37 per share. Sales are expected to be down -4% in FY23 but jump 12% in FY24 to $142.85 billion.
Performance & Valuation
Alibaba stock is up +7% YTD to outperform competitor JD.com’s -17% and the S&P 500’s +4% but trail the Nasdaq’s +10% and the Electric Commerce Markets +11%. Since Alibaba went public in 2014 its stock performance is virtually flat to underperform JD stock, the broader indexes, and its Zacks Subindustry’s +88%.
Image Source: Zacks Investment Research
Still, there have been some nice rallies in Alibaba stock in the past before the large decline among many tech stocks and the broader stock market in the last few years. This makes Alibaba’s Q3 report very important in regaining its footing as an industry leader and there could be plenty of upside ahead based on the company’s valuation.
Trading at $94 per share, BABA stock trades at 15.7X forward earnings which is nicely below its industry average of 19.9X, JD’s 21.4X, and the S&P 500’s 18.3X. Alibaba’s stock also trades 76% below its historical high of 66.6X and at a 57% discount to the median of 36.8X.
Another stock that will receive a considerable amount of attention when it reports its fourth-quarter earnings on February 23 is Block (SQ - Free Report) . The technology services company currently sports a Zacks Rank #3 (Hold) going into its quarterly release and more upside in SQ stock will also cringe on its earnings and the company’s guidance.
Like fellow online payment solutions provider PayPal (PYPL - Free Report) ) among other tech stocks, these equities fell mightily in 2022 amid higher inflation but had nice rallies to start the new year.
While Block rivals PayPal as an online payment solutions provider through Square and Cash App, the company has a diverse business model that extends to other financial and marketing services such as cryptocurrency trading, point of sale (POS) transactions, and online banking products.
Q4 Preview & Outlook
The Zacks Consensus for Blocks Q4 earnings is $0.30 per share, which would be an 11% increase from Q4 2021. However, the Zacks Surprise Prediction indicates Block could significantly miss earnings expectations with the Most Accurate Estimate at $0.18 a share. Sales for the quarter are expected to be $4.53 billion, up 11% from the prior year quarter.
Image Source: Zacks Investment Research
Rounding out its fiscal year 2022, Blocks earnings are now forecasted to drop -38% to $1.06 a share compared to EPS of $1.71 in 2021. Fiscal 2024 earnings are expected to rebound 61% back to $1.71 per share. Earnings estimate revisions have remained unchanged for FY22 throughout the quarter and are slightly higher for FY23. Sales are now projected to be down -1% for FY22 but rise 9% in FY23 to $19.10 billion.
Image Source: Zacks Investment Research
Performance & Valuation
Block stock is up +16% YTD to outperform PayPal’s +6%, the Technology Services Markets’ +11%, and the broader indexes. Even better, since Block went public in 2015 its stock is now up an impressive +467% to also outperform PayPal and the broader indexes.
Image Source: Zacks Investment Research
Trading around $72 a share, Block’s stock trades at roughly 42.1X forward earnings which is much higher than the industry average of 21.7X. With that being said, Block does trade well below its extreme historical high and the median of 551.8X.
Takeaway
Alibaba (BABA - Free Report) and Block’s (SQ - Free Report) valuations are attractive relative to their past but the rising earnings estimate revisions for both its FY23 and FY24 make BABA stock more intriguing at the moment. In correlation Alibaba stock sports a Zacks Rank #2 (Buy) while Block lands a Zacks Rank #3 (Hold).
Still, much of the upside for both stocks will hinge on their quarterly reports and Wall Street will be paying special attention to each company’s guidance and outlook.
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Time to Buy Alibaba (BABA) or Block (SQ) Stock with Earnings Approaching?
This shortened week of trading will be highlighted by internet and technology services companies Alibaba (BABA - Free Report) ) and Block’s (SQ - Free Report) ) quarterly reports.
Let’s see if it’s time for investors to gear up and buy these popular tech stocks with their earnings approaching.
Alibaba (BABA - Free Report)
The reopening of China’s economy provided a strong catalyst for Chinese stocks, but more upside in Alibaba stock very much depends on its fiscal third-quarter report on Thursday, February 23.
After impressive rallies, Chinese stocks including BABA have cooled off recently on concerns that pricing wars upon China’s reopening could dilute margins with Alibaba and E-Commerce rival JD.com (JD - Free Report) ) perfect examples of this scenario.
With that being said, Alibaba stock sports a Zacks Rank #2 (Buy) heading into its quarterly release with earrings estimate revisions trending higher throughout the quarter.
Image Source: Zacks Investment Research
Q3 Preview & Outlook
Alibaba’s Q3 earnings are projected at $2.29 per share, down -13% from Q3 2022 EPS of $2.65 a share. However, the Zacks Expected Surprise Prediction (ESP) indicates Alibaba could beat bottom-line expectations with the Most Accurate Estimate having Q3 EPS at $2.52. On the top line, third-quarter sales are expected to be $35.36 billion, down -7% from the prior year quarter.
Image Source: Zacks Investment Research
Overall, Alibaba’s earnings are now forecasted to dip -12% to $7.31 a share for fiscal 2023 compared to EPS of $8.31 in 2022. Fiscal 2024 earnings are projected to rebound and climb 14% to $8.37 per share. Sales are expected to be down -4% in FY23 but jump 12% in FY24 to $142.85 billion.
Performance & Valuation
Alibaba stock is up +7% YTD to outperform competitor JD.com’s -17% and the S&P 500’s +4% but trail the Nasdaq’s +10% and the Electric Commerce Markets +11%. Since Alibaba went public in 2014 its stock performance is virtually flat to underperform JD stock, the broader indexes, and its Zacks Subindustry’s +88%.
Image Source: Zacks Investment Research
Still, there have been some nice rallies in Alibaba stock in the past before the large decline among many tech stocks and the broader stock market in the last few years. This makes Alibaba’s Q3 report very important in regaining its footing as an industry leader and there could be plenty of upside ahead based on the company’s valuation.
Trading at $94 per share, BABA stock trades at 15.7X forward earnings which is nicely below its industry average of 19.9X, JD’s 21.4X, and the S&P 500’s 18.3X. Alibaba’s stock also trades 76% below its historical high of 66.6X and at a 57% discount to the median of 36.8X.
Image Source: Zacks Investment Research
Block (SQ - Free Report)
Another stock that will receive a considerable amount of attention when it reports its fourth-quarter earnings on February 23 is Block (SQ - Free Report) . The technology services company currently sports a Zacks Rank #3 (Hold) going into its quarterly release and more upside in SQ stock will also cringe on its earnings and the company’s guidance.
Like fellow online payment solutions provider PayPal (PYPL - Free Report) ) among other tech stocks, these equities fell mightily in 2022 amid higher inflation but had nice rallies to start the new year.
While Block rivals PayPal as an online payment solutions provider through Square and Cash App, the company has a diverse business model that extends to other financial and marketing services such as cryptocurrency trading, point of sale (POS) transactions, and online banking products.
Q4 Preview & Outlook
The Zacks Consensus for Blocks Q4 earnings is $0.30 per share, which would be an 11% increase from Q4 2021. However, the Zacks Surprise Prediction indicates Block could significantly miss earnings expectations with the Most Accurate Estimate at $0.18 a share. Sales for the quarter are expected to be $4.53 billion, up 11% from the prior year quarter.
Image Source: Zacks Investment Research
Rounding out its fiscal year 2022, Blocks earnings are now forecasted to drop -38% to $1.06 a share compared to EPS of $1.71 in 2021. Fiscal 2024 earnings are expected to rebound 61% back to $1.71 per share. Earnings estimate revisions have remained unchanged for FY22 throughout the quarter and are slightly higher for FY23. Sales are now projected to be down -1% for FY22 but rise 9% in FY23 to $19.10 billion.
Image Source: Zacks Investment Research
Performance & Valuation
Block stock is up +16% YTD to outperform PayPal’s +6%, the Technology Services Markets’ +11%, and the broader indexes. Even better, since Block went public in 2015 its stock is now up an impressive +467% to also outperform PayPal and the broader indexes.
Image Source: Zacks Investment Research
Trading around $72 a share, Block’s stock trades at roughly 42.1X forward earnings which is much higher than the industry average of 21.7X. With that being said, Block does trade well below its extreme historical high and the median of 551.8X.
Takeaway
Alibaba (BABA - Free Report) and Block’s (SQ - Free Report) valuations are attractive relative to their past but the rising earnings estimate revisions for both its FY23 and FY24 make BABA stock more intriguing at the moment. In correlation Alibaba stock sports a Zacks Rank #2 (Buy) while Block lands a Zacks Rank #3 (Hold).
Still, much of the upside for both stocks will hinge on their quarterly reports and Wall Street will be paying special attention to each company’s guidance and outlook.