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Alibaba (BABA) shares have surged 36% in the last six months to easily top the S&P 500s 17% climb. The Chinese e-commerce giant looks ready to continue its expansion in the post-Jack Ma era as it grows its cloud computing reach and its retail leg expands to smaller cities as part of Chinas middle-class explosion.

With Alibaba set to report its Q3 fiscal 2020 financial results before the market opens on Thursday, February 13, lets see why BABA stock looks like it might be worth buying.

Alibabas Pitch

Alibaba reportedly controls roughly two-thirds of Chinas e-commerce market, through Taobao and Tmall. This alone might be worth the price of admission since China is the worlds second-largest economy.

Plus, more and more of Chinas 1.4 billion people enter the vital middle-class demographic every day. And McKinsey estimates Chinas middle class could hit 550 million by 2022, which is far larger than the entire U.S. population of roughly 330 million.

Last quarter, BABAs mobile monthly active users hit 785 million, up 30 million from the prior-year quarter. Alibaba is also dedicated to expanding its logistics business to help it grow outside of major markets like Beijing and Shanghai, which have become more saturated. With this in mind, BABAs core commerce business, which jumped 40% last quarter, accounted for 85% of total sales.

In an effort to diversify, Alibaba has jumped into cloud computing in recent years. The segment surged 64% last period to account for 8% of second quarter revenue. Alibaba plans to expand its cloud business, as Amazon (AMZN), Microsoft (MSFT), and others prove why cloud is worth the investment.

Meanwhile, the firms digital media and entertainment business, which consists primarily of Youku and UCWeb, jumped 23% last quarter. Alibaba executives pointed to the synergies between commerce and entertainment and noted that Youkus average daily subscribers increased 47%.

The company is also investing in its portfolio with original content that resonates with Chinese audiences. And investors should note that China is one of the only places that Netflix (NFLX) doesnt operate.

Other Fundamentals

Clearly, investors still need to see how the coronavirus will impact Alibaba. But Wall Street has seemed to shake off the fears on the back of better-than-expected earnings results, which includes giants such as Apple (AAPL). And stocks climbed again Tuesday, after a strong start to the week on Monday.

Therefore, most investors will likely want to wait to see what Alibaba executives have to say about the coronavirus and what new guidance they provide. But the nearby chart shows that BABA stock is resting near its highs, with the stock up over 5% in February.

Alibaba shares also climbed above their summer 2018 highs in December. And it has jumped 150% in the last five years, against JD.com's (JD) 54%.

Despite the run, Alibaba stock is trading at a discount against its industrys 42.5X, at 30.5X forward 12-month Zacks earnings estimates. This also comes in below its own three-year median of 33.5X and 42X high during this stretch. Plus, its Internet Commerce industry rests in the top 32% of our more than 250 Zacks industries.

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Outlook & Earnings Trends

Before we look at what to expect, we need to know that Alibaba reports its metrics in Chinese RMB and then offers a comparable U.S. dollar equivalent for the convenience of the reader. Therefore, some of our percentages and estimates will be different.

With this in mind, our Zacks estimates call for Alibabas quarterly revenue to jump 33% to $22.68 billion. Then its full-year fiscal 2020 revenue is projected to climb 33.2%, with 2021s sales expected to climb 31.2% higher than our current-year estimate.

Meanwhile, its adjusted quarterly earnings are expected to climb over 27% to $2.25 per share. And its fiscal 2020 EPS figure is expected to surge 29%, with 2021 projected to come in 21.2% stronger. On top of that, Alibabas earnings estimates have climb since it last reported.

Bottom Line

Alibabas positive earnings revision activity helps it earn a Zacks Rank #1 (Strong Buy). And its pitch to investors remains straightforward: The company is diversifying into new growth areas and its e-commerce business is ready to climb alongside the Chinese economy.

However, it is likely prudent to wait until after Alibabas earnings release to think about buying BABA, as any hint of a coronavirus downturn could send the stock down in the near-term.

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Bull of the Day: Alibaba (BABA) - Yahoo Finance