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Alibaba (BABA) Laps the Stock Market: Here's Why

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Alibaba (BABA - Free Report) closed the latest trading day at $74.55, indicating a +1.64% change from the previous session's end. The stock outpaced the S&P 500's daily gain of 0.77%. Elsewhere, the Dow gained 0.49%, while the tech-heavy Nasdaq added 0.95%.

Coming into today, shares of the online retailer had lost 17.16% in the past month. In that same time, the Retail-Wholesale sector gained 0.04%, while the S&P 500 gained 3.71%.

Analysts and investors alike will be keeping a close eye on the performance of Alibaba in its upcoming earnings disclosure. In that report, analysts expect Alibaba to post earnings of $2.24 per share. This would mark a year-over-year decline of 6.67%. Simultaneously, our latest consensus estimate expects the revenue to be $34.95 billion, showing an 8.22% escalation compared to the year-ago quarter.

For the annual period, the Zacks Consensus Estimates anticipate earnings of $8.20 per share and a revenue of $138.63 billion, signifying shifts of -4.87% and +6.23%, respectively, from the last year.

Additionally, investors should keep an eye on any recent revisions to analyst forecasts for Alibaba. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable 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. Over the last 30 days, the Zacks Consensus EPS estimate has moved 1.21% higher. Alibaba is currently a Zacks Rank #3 (Hold).

With respect to valuation, Alibaba is currently being traded at a Forward P/E ratio of 8.95. This signifies a discount in comparison to the average Forward P/E of 19.58 for its industry.

Meanwhile, BABA's PEG ratio is currently 0.38. 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 was holding an average PEG ratio of 0.94 at yesterday's closing price.

The Internet - Commerce industry is part of the Retail-Wholesale sector. At present, this industry carries a Zacks Industry Rank of 83, placing it within the top 33% of over 250 industries.

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.

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