Momentum investing is all about the idea of following a stock’s recent trend, which can be in either direction. In the “long” context, investors will essentially be “buying high, but hoping to sell even higher.” And for investors following this methodology, taking advantage of trends in a stock’s price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that when a stock continues down the path it’s been traveling, it will facilitate timely and profitable trades.
Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Alibaba (BABA) stock, which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.
It’s also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. BABA stock currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy), along with Style Scores of A or B, outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Is BABA Stock Set to Beat the Market?
Let’s discuss some of the components of the Momentum Style Score for Alibaba stock that show why this online retailer shows promise as a solid momentum pick.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It’s also helpful to compare a security to its industry; this can show investors the best companies in a particular area.
Alibaba stock is up 0.95% over the past week while the Zacks Internet – Commerce industry is up 1.04% over the same time period. BABA stock has been looking quite healthy over a longer time frame, too, as the monthly price change of 8.66% compares favorably with the industry’s 4% performance.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, Alibaba stock has risen 6.42%, and it’s up 9.06% in the last year. On the other hand, the S&P 500 has only moved 4.45% and 5.9%, respectively.
Investors should also take note of the average 20-day trading volume of BABA stock. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above-average volume is typically bearish. In the last 20 days, an average of 12,179,306 shares of Alibaba stock have changed hands.
Earnings Outlook
The Zacks Momentum Style Score also takes into account trends in estimate revisions. Please note that estimate revision trends remain at the core of the Zacks Rank as well. A nice progression of this metric can help show promise, and we have recently been seeing Alibaba stock undergo such a progression .
Over the past two months, eight full-year earnings estimates moved higher compared to none that fell. These revisions helped boost BABA’s consensus earnings per share estimate, which climbed from $6.71 to $7.19 in the past 60 days. Looking at the next fiscal year, four estimates have moved upwards in the last two months, while there have been three downward revisions.
The Bottom Line on Alibaba Stock
Given these factors, it shouldn’t be surprising that BABA is a #1 (Strong Buy) stock and boasts a Momentum Score of A. If you’re looking for a fresh pick that’s set to soar in the near-term, make sure to keep BABA stock on your short list.
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Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
