Alibaba: Zacks’Bear of the Day Play

You’ll have to forgive me for being skeptical recently when it comes to today’s Bear of the Day, Alibaba (BABAAnalyst Report) .  Following the IPO, I bought into the story. It was so seductive with the China growth, the ecommerce play, the rising entrepreneurial spirit of the Chinese people. This charismatic new face reminded me of a young Jeff Bezos or Steve Jobs. It was an exciting time and a thrilling investment.

Well the romance is over and the spell is broken my friends. I don’t need to sit up here and speculate about what may or may not happen when it comes to the Chinese economy. Not to mention all the confusion about the numbers that come out of there. Are the books cooked? Is everything a big lie? Ehhhhh.

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I don’t like buying into the elaborate conspiracy theories surrounding the Chinese economy. But since I’m not learning Mandarin anytime soon I have to lean on the analysts here. The analysts have been increasingly bearish on Alibaba. Their estimate revisions are the reason for the Zacks Rank #5 (Strong Sell) here.

Four analysts have dropped their estimates for the current quarter, next quarter and the current year. It’s cut down the Zacks Consensus Estimate for the current quarter from 46 cents to 38 cents and slashed the current year number from $2.44 to $2.03. I pointed out this disturbing trend in my latest Trending Stocks video.

The market has been range bound on Alibaba since recovering from the February lows. Between early March and today the stock has basically traded between $75 and $82.50 the entire time. The stock is right on the 20-day moving average which has a horizontal slope right now. Furthering the neutral case, the CCI is at -3.44, nearly on the zero line. If the stock were to break below that $75 support, the February lows would come into play.

Investors looking for alternate names in the same industry can take a look at Petmed Express (PETSAnalyst Report) . It’s a Zacks Rank #1 (Strong Buy) while the more popular Amazon (AMZNAnalyst Report) remains a Zacks Rank #3 (Hold).

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