JD.com Beats Street Estimates with Profits


JD.com, one of China’s largest e-commerce and retail companies, just reported earnings for its March quarter that came in well ahead of Street estimate going into the results.

The company reported revenues of $11.1 billion and net income of $0.15 per share for the March quarter. Wall Street was expecting $10.66 billion and a penny per share in net income going into this morning’s earnings results. Year on year revenue growth was 41%.

Annual active customer accounts increased by 40% to 236.5 million versus 169.1 million in the same quarter a year ago.

“The strong results across the board reflect that the Chinese market is embracing our model of a high-quality online shopping experience,” said Richard Liu, chairman and CEO of JD.com. “China’s increasingly discerning consumers are migrating en masse to our unwavering vision of online retail that prioritizes quality and user experience above all else. Looking forward, we are focused on further enhancing our customer experience, while leveraging the capabilities of our platform to serve the needs of a broader business ecosystem.”

For the current quarter ending in June, JD.com is guiding revenues to a range between $12.78 billion and $13.15 billion (using $1 =RMB 6.8832, which is what the company used as the FX rate). At the mid-point, that gives us revenue guidance of $12.97 billion for the March quarter versus Wall Street expectations of $12.87 billion.

Currently, Wall Street sell-siders are expecting the company to earn $0.24 per share for 2017. With earnings of $0.15 per share in Q1 alone, I think those estimates could prove to be pretty low. Maybe a lot lower if one factors in the fact that the company is spinning off its JD Finance unit and as a result margins will expand even further and generate even fatter profits going forward.

“We are pleased to report another strong quarter of top and bottom line growth, as margins benefited from our rapidly growing scale across all of our product categories, as well as improved operating leverage,” said Sidney Huang, JD.com’s Chief Financial Officer. “In the quarters ahead, we will continue to invest in innovative technologies to ensure long-term growth across our platform.”

Look for estimates for JD.com to climb higher once the analysts have wrapped their arms around the numbers from this morning and after the company’s conference call, slated to begin at 7:30 a.m. EST.

As a result, I think the opportunity to invest in JD.com is just as attractive even here as it was just under a year ago, when Walmart took an initial 5% stake (now significantly higher) in the company and when I highlighted JD.com as a compelling investment opportunity.

Shares that day were trading at $21 per share and are currently indicated in early pre-market trading this morning at $38.55 on the bid side.

JD remains an important part of my Chinese investment basket, despite the persistent negative chatter.

By Jay Somaney



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