Chinese tech giant JD.com (JD) will report first quarter fiscal 2018 earnings results after the closing bell Tuesday.
Shares of JD.com, down more than 9% year to date, while falling more than 18% in three months, have been under pressure for most the year. Not only has the stock underperformed the SPDR S&P Retail ETF (XRT), which is down just 0.42% year to date, JD has also lagged the 9.55% year-to-date rise of rival Alibaba (BABA). Nevertheless, analysts remain bullish on JD’s prospects, predicting the stock to rise almost 40% to a consensus of $51 per share.
With better-than-expected earnings results just released from Alibaba, JD — China’s second-largest e-commerce company — is expected to deliver its own solid numbers. Robust online spending trends in China, where sales have surged 37% (in the first two months of the year), according to China's National Bureau of Statistics, has made investors more optimistic about JD, despite the fact that EPS estimates have been reduced by 21% since the quarter began.
For the three months that ended March, the Beijing-based company is expected to deliver earnings of 18 cents per share on revenue of $15.58 billion. This compares to the year-ago quarter when earnings came to 16 cents per share on revenue of $12.03 billion. For the full year, ending in December, earnings are projected to rise 51% year over year to 82 cents per share, while full-year revenue of $74.27 billion would rise 30% year over year.
The company, which last quarter reported missed on revenue and EPS, sending its shares down more than 7%, will look to get back on a winning streak. The bottom line was impacted by a combination of factors, notably the company’s increasing investments in ways to deliver goods to customers faster as evidenced by the degree to which order fulfillment costs and technology expenses grew year over year.
Among other revenue streams, JD makes money by selling digital communications, computers, home merchandise and other products directly to its online shoppers. This model allows the company to grow its profit margins by marking up the products sold. And the company, which ensures not only same-day delivery of its products (in major cities) but also servicing its customers after the sale, has quickly gained a reputation for the quality of its products, given its direct customer engagement.
Beyond the top- and bottom-line numbers, analysts on Tuesday will focus on metrics such as gross merchandise volume and active buyers. Guidance will also be a key area of focus. To the extent the company can demonstrate accelerated growth in net revenue and annual active customer accounts, JD shares, despite falling 9% year to date, could be on a verge of a recovery.
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