Shares of JD.com (NASDAQ: JD), the Chinese e-commerce giant, were falling again today. This time, it was in response to a disappointing earnings report from Alibaba (NYSE: BABA), its close competitor and peer.
As of 1:19 p.m. ET, JD stock was down 4.5%, while Alibaba stock had fallen 6.4%.
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Chinese E-commerce Sector Continues to Struggle
Investors were hoping that Alibaba’s December quarter would give investors a reprieve from a brutal sell-off in Chinese tech stocks, but that was not the case. Instead, Alibaba disappointed the market again, showing that the Chinese e-commerce sector remains weak.
Revenue in the quarter grew just 5% to $36.7 billion, which was in line with estimates. At Alibaba’s core commerce group, Taobao and Tmall, which competes directly with JD, revenue rose just 2% to $18.2 billion, indicating ongoing challenges for JD’s upcoming fourth-quarter earnings report, expected in March. Alibaba attributed a successful 11.11 Shopping Festival to its price-competitive strategy, noting that order volume grew by double digits in the second half of the quarter.
On the bottom line, Alibaba reported adjusted earnings per share of $2.67, down 2% and short of the consensus at $2.69.
Implications for JD.com
Revenue growth at both Alibaba and JD has slowed sharply in recent quarters due to challenges with the Chinese economy and intensifying price competition in the e-commerce sector. Alibaba’s report indicates that the price war with peers like Pinduoduo hasn’t improved, which is likely to impact JD’s results as well. JD managed just 1.7% revenue growth in its third quarter.
More insight will be gained when JD releases its third-quarter earnings report in March. Analysts project a 1.5% revenue fall to $42.1 billion, with earnings per share slipping from $0.70 to $0.63. Nonetheless, low expectations may provide a silver lining for JD investors heading into the report.
Investors may be contemplating $1,000 investments in JD.com, but it’s worth noting that while JD.com wasn’t among the 10 stocks recently highlighted by Motley Fool Stock Advisor as potential runaway successes, the service has outperformed the S&P 500 since 2002*.
Jeremy Bowman has 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.
