China’s JD.com Shares Soar After Q4 Revenue Blow Past Estimates

Chinese e-commerce giant JD.com reported better-than-expected revenue in the fourth quarter as rise in online shopping activity, which accelerated sharply due to the COVID-19 pandemic, continues to increase, sending its shares up over 5% on Thursday.

JD.com said its net revenues surged 31.4% to 224.3 billion yuan for the fourth quarter of 2020. Net service revenues came in at 32.1 billion yuan, up 53.2% from the same period a year ago. Net revenues for the full year of 2020 rose 29.3% from the full year of 2019 to 745.8 billion yuan, beating Wall Street’s consensus estimate of 740.81 billion yuan.

The leading B2C e-commerce player in China, which accounts for over 20% of China’s total B2C online market and over 50% of the online direct sales market, said its non-GAAP diluted net income per ADS for the full year of 2020 was CNY 10.56 per share or $1.62 per share, beating analysts estimate of $1.26 per share.

Following this upbeat result, the U.S.-listed JD.com shares, which surged about 150% in 2020, rose over 5.5% to $94.4 on Thursday.

JD’s 4Q20 earnings beat on tax benefits, while 1P revenue growth was in-line with our expectation with decent user growth,” said Eddy Wang, equity analyst at Morgan Stanley.

JD.com Stock Price Forecast

Nine analysts who offered stock ratings for JD.com in the last three months forecast the average price in 12 months of $115.29 with a high forecast of $133.00 and a low forecast of $105.00.

The average price target represents a 25.11% increase from the last price of $92.15. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $92 with a high of $110 under a bull scenario and $62 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese e-commerce giant’s stock.

Several other analysts have also updated their stock outlook. JD.com had its target price increased by analysts at Macquarie to $133 from $107. The brokerage presently has an “outperform” rating on the information services provider’s stock. Loop Capital increased their target price to $105 from $99.

Moreover, Benchmark upped their target price to $100 from $76 and gave the company a “buy” rating. Zacks Research raised to a “buy” rating from a “hold” and set a $100.00 price target. Barclays increased their price objective to $100 from $89 and gave the company an “overweight” rating.

Analyst Comments

JD has demonstrated strong execution in balancing growth and margin expansion. Together with its strong cash position, JD is able to expand market share amid the increasing online penetration of e-commerce. We expect JD to ride the fast-growing FMCG e-commerce trend in China in view of a low online penetration rate (3.6% in 2019). Behavioral changes in FMCG shopping during the COVID-19 pandemic should have a significant impact on e-commerce players,” Morgan Stanley’s Wang added.

“Current P/E is 26.7x 2022e non-GAAP EPS, and PEG is 1.1x. We believe this still indicates upside potential, given the long runway for margin expansion and potential growth in the online FMCG market,”

Upside and Downside Risks

Risks to Upside: Faster-than-expected margin expansion from operating leverage. Faster-than-expected growth in FMCG e-commerce and home appliances. Successful penetration in lower-tier cities, driving up user growth – highlighted by Morgan Stanley.

Risks to Downside: Adverse effects on demand for discretionary products from the pandemic. Slower-than-expected growth in home appliances and general merchandise (especially FMCG). Intensified competition.

Check out FX Empire’s earnings calendar

China’s JD.com Cashes in on Steady Online Demand, Beats Market Expectations

While China has largely emerged from coronavirus lockdowns with most businesses resuming production, JD.com’s domestic consumers continue to shop online for everything from daily groceries to luxury products.

The Beijing-based company posted revenue of 745.8 billion yuan ($114.97 billion) for the year, beating analysts’ estimate of 740.81 billion yuan.

In a pandemic-struck year, during which retail sales fell 3.9% in China, JD.com’s strategy of ramping up its in-house delivery network enabled faster deliveries.

The company has also been working to expand into price-sensitive lower-tier cities through its shopping platform Jingxi in a bid to stave off stiff competition from rivals like Alibaba and Pinduoduo that are equally popular.

As a result, JD.com raked in 110 million new active customer accounts during the year. Meanwhile, Jack Ma’s Alibaba added about 68 million active buyers in the same period.

U.S.-listed shares of the company, which have been volatile as China looks to tighten scrutiny on its tech giants, were up 3% at $91.98 in early trading.

The world’s second-largest economy has vowed to strengthen oversight of its big tech firms, which rank among the world’s largest and most valuable, citing concerns they have built market power that stifles competition, misused consumer data and violated consumer rights.

The long-term impact of this on JD.com’s business, though unclear, remains a threat. In late December, regulators fined the company, along with Alibaba and other e-commerce sites, 500,000 yuan for engaging in irregular pricing.

The company’s net revenue rose 31.4% to 224.3 billion yuan in the quarter ended Dec. 31, beating analysts’ estimate of 219.73 billion yuan, according to IBES data from Refinitiv.

($1 = 6.4867 Chinese yuan renminbi)

(Reporting by Eva Mathews in Bengaluru and Josh Horwitz in Shanghai; Editing by Krishna Chandra Eluri)

Earnings to Watch Next Week: MongoDB, Campbell Soup, JD.com and Oracle in Focus

Earnings Calendar For The Week Of March 8

Monday (March 8)

Ticker Company EPS Forecast
PSON Pearson £32.79
CASY Casey’s General Stores $0.95
YQ M17 Entertainment -$0.06
GOCO Gocompare.Com $0.47
DM Dominion Midstream Partners -$0.06
YALA Yalla $0.12

 

Tuesday (March 9)

IN THE SPOTLIGHT: MONGODB

MongoDB Inc, which provides an open-source database platform for automating, monitoring, and deployment backups, is expected to report a loss of $0.39 per share in the fourth quarter, which represents a year-over-year decline of 56% from -$0.25 per share seen in the same quarter a year ago. However, in the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 30%.

New York City-based company would post year-over-year revenue growth of over 27% to $156.97 million.

MongoDB has established itself as one of the most popular databases to support the development of modern net-new apps. Into CY21, we see the business at a crucial inflection point. First, it is poised to garner the majority of revs from its public cloud business – the segment where market growth and share gains are the strongest. Second, the acceleration in customer adds suggests that its go-to-market model has matured to scale a modern, cloud-first business,” said Sanjit Singh, equity analyst at Morgan Stanley.

“As a result, an equation for durable 30%+ growth emerges (20%+ customer base growth with near 120% net-expansion from the existing base) – a growth story that does not look overly demanding given the strategic nature of this asset.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 9

Ticker Company EPS Forecast
SLA Standard Life Aberdeen PLC £6.04
CMD Cantel Medical Corp $0.51
NAV Navistar International $0.01
DQ Daqo New Energy $1.12
THO Thor Industries $1.57
DKS Dick’s Sporting Goods $2.24
OSH Oak Street Health -$0.23
ABM ABM Industries $0.59
AVAV AeroVironment $0.00
MDB MongoDB Inc -$0.39
HRB H&R Block -$1.19
CLNE Clean Energy Fuels $0.00
ADOOY Adaro Energy ADR $0.05
ITV ITV £5.82

 

Wednesday (March 10)

IN THE SPOTLIGHT: CAMPBELL SOUP

CAMPBELL SOUP: Camden County, New Jersey-based processed food and snack company is expected to report a profit of $0.83 per share in the fiscal second quarter, which represents year-over-year growth of over 15% from $0.72 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 9%. One of the world’s top soup makers would post year-over-year revenue growth of over 6% to $2.3 billion.

“High exposure to secularly challenged soup category: Shelf-stable soup (26.5% of sales) faces headwinds given shifts in preferences toward better-for-you and fresh foods, competition from private label, and pricing pressure. Snacking brands are well-positioned, but face competitive pressures: Milano, Goldfish, Farmhouse, and Snyder’s-Lance have strong brand equity but face high competition from PEP and MDLZ,” said Pamela Kaufman, equity analyst at Morgan Stanley.

“Significant organizational changes over last two years refocused the company and show promise: Divesting non-core businesses and new leadership refreshes the company’s strategic plan, allowing the company to focus on its key segments and geographies.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 10

Ticker Company EPS Forecast
VERX Vertex Inc. Cl A $0.07
CPB Campbell Soup $0.83
AMC AMC Entertainment -$3.39
SUMO Sumo -$0.12
CLDR Cloudera Inc. $0.11
FNV Franco Nevada $0.70
VNET 21Vianet $0.05
BAK Braskem $1.05
SMTC Semtech $0.48

 

Thursday (March 11)

IN THE SPOTLIGHT: JD.COM, ORACLE

JD.COM: Chinese e-commerce platform JD.com is expected to report a profit of $0.22 in the fourth quarter, which represents year-over-year growth of over 177% from $0.08 per share seen in the same quarter a year ago.

The leading B2C e-commerce player in China, which accounts for over 20% of China’s total B2C online market and over 50% of the online direct sales market, would post year-over-year revenue growth of about 35% to $33.1 billion.

JD’s recent accelerated moves in Community Group Buying business could leverage its advantages in the e-commerce supply chain. Its fast-growing businesses could bring incremental growth momentum into 2021. Maintain Overweight,” said Eddy Wang, equity analyst at Morgan Stanley.

“We forecast that JD’s total revenue will grow 29% YoY in 4Q20, driven by strong demand for electronics and home appliance consumption during promotion season, as well as sustainable strong demand for online FMCG (i.e., JD’s GMV grew 33% YoY during the Double 11 promotion period). Meanwhile, we expect JD to increase its reinvestment to boost consumption in 4Q20, which could drag on its 4Q margin; as such, we forecast that JD’s 4Q20 non-GAAP net margin will reach 0.97% (vs. 0.5% in 4Q19 and 3.19% in 3Q20).”

ORACLE: Austin, Texas-based computer technology corporation is expected to report a profit of $1.11 in the fiscal third quarter, which represents year-over-year growth of over 14% from $0.97 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 5%. One of the largest vendors in the enterprise IT market would post $10.06 billion in sales for the current fiscal quarter, according to Zacks Investment Research. On average, analysts expect that Oracle will report full-year sales of $40.02 billion for the current year, with estimates ranging from $39.44 billion to $40.33 billion.

Oracle’s current low valuation at 13x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” Keith Weiss, equity analyst at Morgan Stanley.

“We see 15% EPS growth in FY21 and 6% in FY22, driven by an aggressive pace of share buybacks. However, cc revenue growth is 2%, in a software sector filled with strong secular growth stories, and just 2% operating income growth points to Oracle potentially reaching peak margins, leaving us Equal-weight at our $67 price target.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 11

Ticker Company EPS Forecast
JD JD.com $0.22
ULTA Ulta Salon Cosmetics Fragrance $2.18
MTN Vail Resorts $2.03
DOCU DocuSign Inc. $0.22
WPP WPP ADR $2.75
ORCL Oracle $1.11
CELH Celsius $0.03

 

Friday (March 12)

Ticker Company EPS Forecast
SHCAY Sharp ADR $0.08
EBR Centrais Eletricas Brasileiras $0.24

 

JD.com Nudges Toward All-Time High After Earnings Beat

JD.com, Inc. (JD) jumped 7.93% Monday to trade just below its all-time high after the Chinese e-commerce giant delivered better-than-expected quarterly results. The company reported second-quarter (Q2) adjusted earnings of 50 cents per share, easily surpassing analysts’ expectations of 39 cents a share.

The company did not offer guidance for the current quarter, due to restrictions relating to its recent listing on the Hong Kong stock exchange.

The Beijing-based online retailer grew its active customer accounts by an impressive 30% to 417.4 million over the past year ended June 30. Moreover, mobile daily active users grew by 40% in June. As of Aug. 18, 2020, the Nasdaq-listed JD.com ADR has a market capitalization of $105.24 billion and trades over 90% higher on the year. In the past three months alone, the shares have gained 31.72%.

Supply Chain Focus

The company continues to invest heavily in supply chain management for future growth. In July, the firm bought a stake in established supply chain manager Li & Fung to leverage private-label initiatives for the Chinese domestic market. “Our strong financial and operating performance form the basis for JD’s continued investment in innovative supply chain capabilities and a superior customer experience to support our long-term growth,” said Sandy Xu, the company’s chief financial officer.

Wall Street Outlook

Goldman Sachs analyst Ronald Keung upgraded JD.com to a ‘Conviction Buy’ after the results and raised his price target to $85 from $73, implying a 27% premium from Monday’s $66.98 close. The analyst argues the company’s strong Q2 should sustain the stock’s uptrend amid the ongoing retail scale expansion from discretionary to staple goods. Elsewhere, analysts overwhelmingly believe the shares have further upside. The stock receives 1 ‘Strong Buy’ rating, 17 ‘Buy’ ratings, and 3 ‘Hold’ ratings. At this time, no analyst recommends selling the shares.

Technical Outlook and Trading Tactics

After trading within an ascending triangle for the better part of six weeks, JD.com shares finally broke through the pattern’s top trendline on above-average volume after the upbeat earnings report. Furthermore, the moving average convergence divergence (MACD) indicator crossed above its trigger line in Monday’s session to generate a buy signal.

Traders who anticipate a continuation move higher should consider using the 50-day simple moving average (SMA) average as a trailing stop. To implement this strategy, stay in the trade until price closes below the indicator.