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Will Alibaba Group (BABA) Beat Earnings Estimates in Q4?

We expect Alibaba Group BABA to beat expectations when it reports fourth-quarter fiscal 2016 results on May 5.

Why a Likely Positive Surprise?

Our proven model shows that Alibaba Groupis likely to beat on earnings because it has the right combination of the two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +23.68%. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Alibaba Grouphas a Zacks Rank #3 (Hold).

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement. 

The combination of Alibaba Group’s Zacks Rank #3 and +23.68% ESP makes us reasonably confident in looking for an earnings beat.

What is Driving the Better-than-Expected Earnings?

The Chinese e-Commerce operates as a platform for third-party sellers and does not sell goods directly to merchants or hold inventory. Alibaba Group’s strong market position in China, solid growth in mobile business, continued improvement in commerce retail business and improving gross merchandise value (GMV) should boost fiscal fourth-quarter earnings.

Additionally, Alibaba is witnessing increasing monetization rates. The company’s focus on foreign brands and other high-quality merchants on its platforms continue to increase its online marketing inventory on both mobile and PC. As a result of a higher monetization rate, its profits also improve.

Some of the current buoyancy surrounding the shares is related to the Chinese e-Commerce goliath’s dominance in the mobile search market and continued product development efforts.

Other Stocks to Consider

Alibaba Groupis not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:

NV5 Global, Inc. NVEE, with an Earnings ESP of +3.57% and a Zacks Rank #1. The company is slated to report first-quarter 2016 earnings results on May 5, 2016.

Fidus Investment Corporation FDUS, with an Earnings ESP of +2.44% and a Zacks Rank #1. The company is slated to report first-quarter 2016 earnings results on May 5, 2016.

Synopsys Inc. SNPS, with an Earnings ESP of +6.38% and a Zacks Rank #1. The company is slated to report second-quarter fiscal 2016 earnings results on May 18, 2016.

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SYNOPSYS INC (SNPS): Free Stock Analysis Report
 
ALIBABA GROUP (BABA): Free Stock Analysis Report
 
FIDUS INVESTMNT (FDUS): Free Stock Analysis Report
 
NV5 HOLDING INC (NVEE): Free Stock Analysis Report
 
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