Alibaba Group: Zacks’ Bear of the Day Play

It seems as though there is little that can stop the economic slide in China as stocks tied to this nation have been hit hard as of late. As a great example of this negative trend, take for example China’s e-commerce giant Alibaba (BABAAnalyst Report) which is a poster child for the sluggish trading impacting the Chinese market right now.

Once a hot IPO, BABA has crumbled in recent trading and is now approaching its initial public offering price once more. This represents a loss of about 25% in just three months time and while some might view this as a potential buying opportunity, there are actually plenty of reasons to think that more losses could be ahead if look to recent earnings estimate revisions.

BABA Estimate Revisions

Thanks to concerns over China’s economic growth, it appears as if spending in the country might take a hit. And with a lower yuan, there are lower prospects for buying of foreign goods should this trend continue as well. With this backdrop, earnings estimate revisions lower for the current year have outnumbered the increases by a ratio of 5:1, while the next year ratio has been 6:0 in favor of the decreases.

Thanks to these declines, the consensus current year EPS estimate has fallen from $1.94/share 30 days ago to just $1.72/share today while the next year figure has fallen from $2.65/share 30 days ago to just $2.40/share today. Add in four straight misses at earnings season including a four quarter average of -22%, and it is easy to see why this is a Zacks Rank #5 (Strong Sell) stock.

Better Opportunities?

Things at BABA are clearly not looking very promising right now and there is little prospect of a turnaround given the broad China malaise. Shares of this giant could easily fall a bit further from here and there are a number of better options out there right now.

This is particularly true considering that the internet commerce space is ranked in the top 50% of industries right now and that only two other companies in the space have #5 ranks (out of 27) at this time. One comparable company that is far better positioned is Amazon ( (AMZNAnalyst Report).

While this stock has soared in 2015, it has faced trouble in recent trading though this could be an excellent time to get in on the security. Earnings estimates have been skyrocketing and AMZN is now expected to do $1.39/share in EPS for this year compared to 50 cents a share just 30 days ago. This huge increase makes AMZN a great choice in the e-commerce space, and one that is definitely better than the sluggish BABA right now.

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