The Chinese e-commerce company, JD.com (JD, Financial), reported its earnings on November 17 before the bell and the numbers were contrasting as revenues moved higher but did not yield profits ending in losses that exceeded the Street expectations. So, the numbers were decent but did not generate much of a positive momentum for the stock which plunged about 5.07% in the trading session on the day the results were made public. Let’s dive in directly into the numbers and assess the performance of the e-commerce company in the third quarter. Also, we can take a brief look at the highlights shared on the final quarter of the fiscal year by the company management.
The mixed set of numbers
The company’s revenue for the quarter stood at $4.7 billion which beat Street estimates by $30 million for the fiscal quarter. In fact, the company’s posted a greater than expected 61% jump in third quarter revenue as the number of company accounts has more than doubled to 46.1 million from a year earlier.
The revenue was being closely watched for the company as its earnings was expected to be affected by a series of exceptional expenses related to the strategic tie-up with Tencent Holdings Ltd. (TCEHY, Financial). The company has also seen improvement in sales through its advertising service and newer online “marketplace” business which competes with the distant rival, Alibaba’s (BABA, Financial) Taobao. Besides the earnings from the online business, the net revenue from outside its online-direct sales business was up 184% from a year ago. The gross merchandise value (GMV) on JD.com stood at 67.3 billion yuan, up by a whopping 111% from the same period last year.
The third quarter income was also positive excluding exceptional items standing at 370.8 million yuan which means that it was more than double of what was earned a year back. But unfortunately, it ultimately reported a net loss of 164.4 million yuan or $26.8 million which is attributed to the amortisation of intangible assets resulting from the acquisition of assets from Tencent. Indeed the net loss does not stand comparable to the net profit of 75 million yuan a year ago.
Its third quarter operating loss widened to 406 million yuan from 82 million yuan reported a year earlier. Something which is important to share regarding JD.com, is that unlike its rival, Alibaba, it has been struggling hard to see the face of profitability in the past few quarters. That’s why the bottom line reported a net loss of $0.04 a share versus expectations of a net loss of $0.01 per share.
However, there were some key takeaways that show that JD.com’s business is actually growing and let’s get to the next section for some understanding on the same.
The primary takeaways
During the earnings conference, there were some takeaways that could be interesting for investors invested in the stock. JD.com is diversifying its business portfolio and is presently moving away from electronics. For Q3, 70% of its fulfilled orders were for non-electronic products while general GMV rose 177% year-over-year to make up 46% of total GMV for the quarter.
Also the mobile business is under acceleration mode, as mobile orders increased 500% year-over-year in the quarter. Total mobile orders currently account for 30% of total JD orders. Business from JD’s native mobile app, Weixin (WeChat) and Mobil QQ are doing well and that has helped in pulling up the order count for the quarter.
Guidance remains strong
The company forecasts Q4 revenue to increase 64% to 69% year-over-year versus 61% increase in Q3 year-over-year. Management have reiterated that non-GAAP margin would be between break-even and negative 1% for Q4 and the full-fiscal year.
The Beijing based company expects revenue to reach a range between 32 and 33 billion yuan in the fourth quarter as its investing in logistics and aims to increase penetration in China’s smaller cities.
Last note
As the Chinese demographics remains promising, it can be expected that the top line growth will continue briskly in the coming quarters. Analysts and investors are contended with the third quarter results and are hoping to see better results in the foreseeable future. So, let’s stay tuned!
