Alibaba Group Holding Ltd (BABA)

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Bull of the Day: Alibaba (BABA)
By: Zacks Investment Research | August 23, 2023

Somewhere along the way, Chinese stocks fell out of favor. I suppose that whole “Trade War” thing had a little to do with it. Even now, the occasional headline hits the wires about US-Chinese relations having some strain. That doesn’t mean that you should ignore the stocks. To the contrary, some of these stocks are showing signs of serious growth.

I lean on the Zacks Rank to help me find ideas. Stocks which are in the good graces of our Zacks Rank have the most consistent earnings trends. One such stock is today’s Bull of the Day, the well known Chinese e-commerce giant Alibaba (BABA).

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others.


Image Source: Zacks Investment Research

Alibaba is currently a Zacks Rank #1 (Strong Buy) in the Internet – Commerce industry which ranks in the Top 25% of our Zacks Industry Rank. The reason for the favorable rank is the series of positive earnings estimate revisions coming from analysts over Wall Street. Over the last 30 days, two analysts have increased their earnings estimates for the current year and next year. The bullish moves have pushed up our Zacks Consensus Estimates from $7.81 to $9.16 for the current year and $8.61 to $9.96 for next year.

That means that analysts are forecasting 15.37% EPS growth for this year and 8.73% for next year. That’s on revenue growth of 4.97% for this year and 8.95% for next year. With that sort of growth, you’d expect to see some rich valuations. However, that is not the case here with Alibaba. Forward PE on Alibaba is only 9.67x earnings. Compare that to the industry average of 18.6x earnings and the broad market’s 20.5x.

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