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Bear Of The Day: Alibaba (BABA)

Brian Bolan
·2-min read

Alibaba (BABA) is a Zacks Rank #5 (Strong Sell) as earnings estimates have tracked lower after a recent earnings beat.  The company s. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.

Description

Alibaba Group Holding is one of the leading e-commerce giants in China. Over the last few years, the company has transformed itself from being a traditional e-commerce company to a conglomerate that has businesses ranging from logistics and food delivery to cloud computing.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

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In the case of Alibaba, I see three beats and one miss of the Zacks Consensus Estimate. The most recent quarter was a beat with the company posting $1.40 when $1.24 was expected.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For BABA I see annual estimates moving lower of late.

The current year (2024) consensus number moved lower from $8.99 to $8.26 over the last 60 days.

The next year has moved from $10.10 to $9.17 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

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