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The Zacks Analyst Blog Highlights: Alibaba, Tencent, JD.com and Walmart
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For Immediate Release
Chicago, IL – August 22, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Alibaba (BABA - Free Report) , Tencent (TCEHY - Free Report) , JD.com (JD - Free Report) and Walmart (WMT - Free Report) .
Should You Buy Alibaba (BABA - Free Report) Stock Ahead of Earnings
Shares of Alibaba have slipped nearly 9% over the last three months as investors assess what impact trade tensions will have on the Chinese e-commerce powerhouse. With that said, Alibaba stock has climbed heading into the release of its quarterly financial results Thursday. So let’s see if BABA might be worth buying ahead of earnings.
Overview
Alibaba is one of the world’s largest online retailers, often considered the Amazon of China, operating three main sites: Taobao, Tmall and Alibaba.com. The company has actively expanded its reach in China, diving into everything from physical stores to food delivery. Alibaba announced in early August a partnership with Starbucks that will see BABA utilize its recently acquired food-delivery startup Ele.me.
Like Amazon, Alibaba is also a cloud computing firm. Alibaba grabbed 4% of the cloud computing market share last quarter, which placed the firm far behind Amazon and Microsoft, but close to IBM’s 8% and Google’s 6%, according to Synergy Research Group.
However, some investors and analyst fear that Alibaba might be negatively impacted by the ongoing trade dispute between the world’s two largest economies—which is reportedly starting to hit China harder than anticipated. Fellow Chinese company Tencent saw its stock price fall after regulators blocked one of its more popular video games. “Alibaba may be in better graces, but between the trade war and the slowdown of the Chinese economy, I'd rather stay away," CNBC's Jim Cramer said on Monday.
Some analysts have said that fears about trade hurting Alibaba or its peer JD.com are more serious down the road. So will Alibaba continue a run of impressive retail performances that saw Walmart and others “wow” investors?
Stock Price Movement
BABA stock is up 171% over the last three years, which outpaced its industry’s 96% climb and the S&P 500’s 51% jump. We can see that Alibaba’s strong performance continued over the last two years, but shares of BABA have cooled substantially over the last 12 months. Shares of BABA are sideways over the last year, with some massive turbulence mixed in throughout. Heading into Tuesday, Alibaba stock was up just roughly 2.3% over the last year, which lags the S&P’s 17% and its industry’s 37% gain.
Valuation
BABA stock is currently trading at 32.4X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to the S&P’s 17.4X and its industry’s 27.7X average. Shares of Alibaba have traded as high as 43.4X and as low as 29.4X over the last year, with a one-year median of 34.8X.
Therefore, BABA stock has traded much higher recently, and the chart below shows that Alibaba’s valuation has looked much worse at points over the last three years. And compared to Amazon’s sky-high forward P/E, BABA’s current valuation picture looks much more solid.
Outlook
Our current Zacks Consensus Estimate is calling for Alibaba’s quarterly revenues to hit $12.25 billion, which would represent a massive 65.5% surge from the year-ago period’s $7.4 billion. Looking ahead to the full year, the firm is projected to see its revenues soar nearly 56% to hit $59.72 billion.
At the other end of the income statement, BABA’s adjusted quarterly earnings are projected to pop by 10.3% to reach $1.29 per share, while its fiscal year EPS figure is expected to expand by 18.7%.
Bottom Line
Alibaba’s quarterly growth projections look strong, but investors won’t be pleased to see that the firm’s quarterly EPS projection has fallen by $0.15 over the duration of the quarter—and by $0.04 in the last seven days. Plus, over the last 30 days, the Chinese e-commerce company has only received negative earnings estimate revision activity for its quarter, as well as for its current fiscal year. All of this is to say that Alibaba’s earnings outlook has trended completely in the wrong direction over the course of the quarter, which helps it land its Zacks Rank #4 (Sell).
Investors should also note that Alibaba has fallen short of our quarterly earnings estimates in four out of the last six quarters, which includes the trailing two periods. Therefore, Alibaba stock might be one to stay away from for now.
Alibaba is scheduled to release its June quarter financial results before the market opens on Thursday, August 23.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Alibaba, Tencent, JD.com and Walmart
For Immediate Release
Chicago, IL – August 22, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Alibaba (BABA - Free Report) , Tencent (TCEHY - Free Report) , JD.com (JD - Free Report) and Walmart (WMT - Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
Should You Buy Alibaba (BABA - Free Report) Stock Ahead of Earnings
Shares of Alibaba have slipped nearly 9% over the last three months as investors assess what impact trade tensions will have on the Chinese e-commerce powerhouse. With that said, Alibaba stock has climbed heading into the release of its quarterly financial results Thursday. So let’s see if BABA might be worth buying ahead of earnings.
Overview
Alibaba is one of the world’s largest online retailers, often considered the Amazon of China, operating three main sites: Taobao, Tmall and Alibaba.com. The company has actively expanded its reach in China, diving into everything from physical stores to food delivery. Alibaba announced in early August a partnership with Starbucks that will see BABA utilize its recently acquired food-delivery startup Ele.me.
Like Amazon, Alibaba is also a cloud computing firm. Alibaba grabbed 4% of the cloud computing market share last quarter, which placed the firm far behind Amazon and Microsoft, but close to IBM’s 8% and Google’s 6%, according to Synergy Research Group.
However, some investors and analyst fear that Alibaba might be negatively impacted by the ongoing trade dispute between the world’s two largest economies—which is reportedly starting to hit China harder than anticipated. Fellow Chinese company Tencent saw its stock price fall after regulators blocked one of its more popular video games. “Alibaba may be in better graces, but between the trade war and the slowdown of the Chinese economy, I'd rather stay away," CNBC's Jim Cramer said on Monday.
Some analysts have said that fears about trade hurting Alibaba or its peer JD.com are more serious down the road. So will Alibaba continue a run of impressive retail performances that saw Walmart and others “wow” investors?
Stock Price Movement
BABA stock is up 171% over the last three years, which outpaced its industry’s 96% climb and the S&P 500’s 51% jump. We can see that Alibaba’s strong performance continued over the last two years, but shares of BABA have cooled substantially over the last 12 months. Shares of BABA are sideways over the last year, with some massive turbulence mixed in throughout. Heading into Tuesday, Alibaba stock was up just roughly 2.3% over the last year, which lags the S&P’s 17% and its industry’s 37% gain.
Valuation
BABA stock is currently trading at 32.4X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to the S&P’s 17.4X and its industry’s 27.7X average. Shares of Alibaba have traded as high as 43.4X and as low as 29.4X over the last year, with a one-year median of 34.8X.
Therefore, BABA stock has traded much higher recently, and the chart below shows that Alibaba’s valuation has looked much worse at points over the last three years. And compared to Amazon’s sky-high forward P/E, BABA’s current valuation picture looks much more solid.
Outlook
Our current Zacks Consensus Estimate is calling for Alibaba’s quarterly revenues to hit $12.25 billion, which would represent a massive 65.5% surge from the year-ago period’s $7.4 billion. Looking ahead to the full year, the firm is projected to see its revenues soar nearly 56% to hit $59.72 billion.
At the other end of the income statement, BABA’s adjusted quarterly earnings are projected to pop by 10.3% to reach $1.29 per share, while its fiscal year EPS figure is expected to expand by 18.7%.
Bottom Line
Alibaba’s quarterly growth projections look strong, but investors won’t be pleased to see that the firm’s quarterly EPS projection has fallen by $0.15 over the duration of the quarter—and by $0.04 in the last seven days. Plus, over the last 30 days, the Chinese e-commerce company has only received negative earnings estimate revision activity for its quarter, as well as for its current fiscal year. All of this is to say that Alibaba’s earnings outlook has trended completely in the wrong direction over the course of the quarter, which helps it land its Zacks Rank #4 (Sell).
Investors should also note that Alibaba has fallen short of our quarterly earnings estimates in four out of the last six quarters, which includes the trailing two periods. Therefore, Alibaba stock might be one to stay away from for now.
Alibaba is scheduled to release its June quarter financial results before the market opens on Thursday, August 23.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.