Shares of JD.com (NASDAQ: JD), the Chinese e-commerce giant, experienced a decline in response to a disappointing earnings report from its close competitor and peer, Alibaba (NYSE: BABA).
As of 1:19 p.m. ET, JD stock was down 4.5%, while Alibaba stock had fallen 6.4%.
Image source: Getty Images.
Challenges in the Chinese Market Persist
The continuous slump in Chinese tech stocks has left investors hoping for respite. However, Alibaba’s underwhelming performance in the December quarter has failed to provide such relief. The earnings report further solidified concerns about the fragility of the Chinese e-commerce industry.
Revenue in the quarter grew by a mere 5% to $36.7 billion, meeting estimates. The core commerce group of Alibaba, Taobao and Tmall, which competes directly with JD, saw revenue rise by only 2% to $18.2 billion. This figure foreshadows potential disappointment for JD’s fourth-quarter earnings report, slated for March. Despite Alibaba’s successful 11.11 Shopping Festival and double-digit order volume growth in the latter half of the quarter, attributed to its price-competitive strategy, the company’s adjusted earnings per share of $2.67 marked a 2% decrease from the consensus at $2.69.
Implications for JD.com
The significant deceleration in revenue growth witnessed by both Alibaba and JD is a direct consequence of the challenges posed by the Chinese economy and the escalating price wars in the e-commerce sector. Alibaba’s report emphasizes that the competitive pricing battles with peers like Pinduoduo have not subsided, which is likely to exert downward pressure on JD’s results. Certainly, with only a 1.7% revenue growth in its third quarter, JD faces an uphill battle.
Further insights will be revealed when JD releases its third-quarter earnings report in March. Analysts expect a 1.5% drop in revenue to $42.1 billion, with earnings per share declining from $0.70 to $0.63. Perhaps the silver lining for JD investors ahead of the report is that the modest expectations are already factored into the stock value.
Should you invest $1,000 in JD.com right now?
Before investing in JD.com, it’s essential to consider this:
The Motley Fool Stock Advisor analyst team identified what they deem the 10 best stocks for investors to buy now, and JD.com didn’t make the cut. The 10 stocks that made the list could potentially yield substantial returns in the years to come.
Stock Advisor furnishes investors with a clear framework for success, comprising guidance on portfolio construction, regular analyst updates, and two new stock picks each month. Since 2002, the Stock Advisor service has outperformed the S&P 500 return by more than threefold.
*Stock Advisor returns as of February 6, 2024
Jeremy Bowman holds positions in JD.com. The Motley Fool has positions in and recommends JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.