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Should You Buy Alibaba (BABA) Stock Ahead of Q4 Earnings?

In March, Alibaba BABA announced that its gross merchandise volume (GMV) surpassed $476 billion dollars in fiscal 2016.  This was made just over a week prior to the end of its fiscal year.  Alibaba is reporting its quarterly and full year earnings on the 5th of May, where many investors expect to see results showing a year with record profitability and revenues for the company.

Should you buy shares prior to the earnings report?  There are a few important facts to consider before deciding whether or not you’re going to pull the trigger on BABA.  Alibaba stock is a Zacks Rank #3 (Hold), and its shares have a beta of 3.06.

Alibaba has done a great job of growing sales over the last few years, which makes it an interesting stock to ponder buying for the long run.  In this article though, we are only looking at BABA’s stock potential over the short term. 

Alibaba has beaten our EPS consensus estimate in two of the last four quarters, which isn’t the most consistent track record.  However, it has beaten our consensus in each of the last two quarters.  The company does have a positive Earnings ESP (Expected Surprise Prediction) of 23.68% for this quarter.  When a company has a positive ESP along with a Zacks Rank #3 (Hold) or better, it has a great chance of beating our earnings consensus estimate when it releases its quarterly report.  In fact, the chance of meeting or beating our earnings consensus is about 80%.

Bottom Line

Buying now could be pretty rewarding, especially when you consider the fact that the stock is trading at a 6% discount compared to the price of BABA shares on April 20.  BABA is trading at a forward PE of 31.65, which is very reasonable when factoring how much growth is expected from the company.  The e-commerce giant does have a lot of exposure to the Chinese economy, but it looks like it has a great chance to surpass our earnings consensus estimate when it releases its earnings this Thursday.

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