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JD.com reported strong results for the second quarter, but the overall picture is weighing on investors.
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JD.com
It smashed earnings expectations, but the e-commerce giant’s stock was falling on Wednesday, in a reflection of gloom in Chinese markets amid fears of a slowdown in the world’s second-largest economy.
JD.com (Stock ticker: JD) reported earnings per share of CNY5.39 (74 cents) on revenue of CNY287.9 billion (US$39.5 billion) in the second quarter. Earnings and sales represented increases of 33% and 8% year-on-year, respectively, and the results steadily beat expectations among analysts surveyed by FactSet for earnings per share at 4.95 yuan and revenue at 280 billion yuan.
“We reported a strong second quarter performance both financially and operationally,” said Sandy Xu, CEO of JD.com. “We are also encouraged to see the number of merchants in our marketplace more than doubled and reached a new record during the quarter, which reflects our efforts to build an outstanding marketplace ecosystem.”
Shares of US-listed JD.com fell 5.3% in premarket trading, as investors failed to get excited about results that were, on the face of it, very strong, with solid first-quarter earnings and revenue growth amid a challenging operating environment. The weakness in JD.com stock matches the trend among peers, with shares in e-commerce competition
Ali Baba
(BABA) decreased by 2.1%.
The problem for JD.com — just like Alibaba, which reported results last week — is the macroeconomic environment, and the fact that the company didn’t include forward guidance in its earnings statement (which is typical).
China is facing a major slowdown, as a series of economic data in recent months point to a grim decline in consumption, a trend that has a direct impact on companies such as JD.com. Investor response to the stimulus has been muted. While JD.com’s operating efficiency should be rewarded—expenses are trending toward a smaller percentage of revenue—and that can’t even buck big-picture trends.
Write to Jack Denton at jack.denton@barrons.com
