JD.com (JD) Stock: Why Shares Jumped 5% After Profit Plunged 55%

TLDR

• JD.com’s third-quarter revenue hit 299.1 billion yuan, surpassing the 294.05 billion yuan analyst forecast by 5 billion yuan.
• Net income dropped to 5.3 billion yuan from 11.7 billion yuan year-over-year as the company invested in expansion.
• The e-commerce platform reached 700 million annual active customers in October.
• Food delivery operations improved with reduced investment needs due to better unit economics.
• Shares climbed nearly 5% in premarket trading after the earnings beat.

JD.com delivered third-quarter results that beat revenue expectations. The Chinese e-commerce company posted 299.1 billion yuan in total revenue for the period.

This represented a 14.9% jump from the previous year. Wall Street analysts had projected 294.05 billion yuan.

The revenue beat sent shares up nearly 5% in premarket trading. This happened even though profits took a hit.

JD.com, Inc., JD

Net income fell to 5.3 billion yuan from 11.7 billion yuan in the same quarter last year. Adjusted profit came in at 5.8 billion yuan, down from 13.17 billion yuan.

The profit decline came as JD.com poured money into global expansion. The company also maintained promotional offers for Chinese shoppers.

Analysts had expected adjusted net profit of 4.23 billion yuan. JD.com beat that estimate despite the year-over-year drop.

Customer Growth Hits Milestone

The company reached 700 million annual active customers in October. CEO Sandy Xu pointed to strong growth in both user base and shopping frequency.

This growth happened during the July-September quarter. Chinese consumers have been cautious with spending due to job and income concerns.

JD.com and competitors like Alibaba have been cutting prices to attract shoppers. These discounts have squeezed margins across the industry.

The company benefited from government trade-in programs. These policies let consumers exchange old appliances for new ones.

JD.com is the top home appliance retailer in China. The government subsidies helped drive sales on the platform.

Food Delivery Shows Promise

JD.com’s food delivery unit launched earlier this year. The division posted steady order volume growth in the third quarter.

The company competes with Meituan and Alibaba’s recently rebranded Taobao Shangou. China’s market regulator has pushed for “rational” competition in the sector.

JD.com reduced its food delivery investment sequentially. The business showed improved unit economics as it scaled up.

The division generated deeper synergies with JD Retail. This allowed the company to spend less on the business than in prior quarters.

The e-commerce price war has weighed on the entire sector. JD.com shares had dropped around 10% year-to-date through Wednesday’s close.

The premarket rally followed the better-than-expected results. Revenue growth of 14.9% topped estimates by roughly 5 billion yuan.

JD.com’s investment in new business segments appears to be paying off. The food delivery unit’s improving performance helped narrow losses in the division.

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