Rival Chinese e-commerce giants Alibaba and JD.com got different reactions from investors after reporting quarterly results Thursday. Alibaba stock traded sideways following a revenue miss while JD stock rose on stronger-than-expected earnings.
Both stocks have been slumping amid concerns about the Chinese economy, the world's second largest. Alibaba and JD are also battling for consumer dollars against a fast-rising rival in PDD Holdings, which operates discount shopping platform Pinduoduo in China and Temu in the rest of the world.
For its June-ended fiscal first quarter, Alibaba revenue grew 4% to 243.4 billion yuan, or $33.5 billion. That disappointed compared to prior analyst forecasts for 6% growth to 248.3 billion yuan, or $34.6 billion, according to FactSet.
Adjusted earnings for Alibaba were 16.44 yuan per American depositary share (ADS), or $2.16 per ADS. Analysts polled by FactSet were expecting earnings of 15 yuan per ADS, or $2.09.
Meanwhile, JD.com said revenue grew 1.2% to 291.4 billion yuan, or $40.7 billion. That was ahead of estimates of 291 billion yuan, according to FactSet. Adjusted earnings of 9.36 yuan per ADS easily beat estimates of 6.24 yuan per ADS.
On the stock market today, Alibaba stock traded sideways before closing at 79.54, up one-tenth of a percent. Shares were lower premarket, temporarily recovered but then closed flat. JD stock, on the other hand, gained more than 4% to close at 27.
Alibaba Stock In Consolidation Pattern
Alibaba's 4% revenue growth marked a slowdown from 7% year-over-year sales growth in its March quarter. Meanwhile, Alibaba's net profit fell 29% to 24.3 billion yuan for the quarter.
As consumer spending has slowed in China, Alibaba has been battling for market share with Pinduoduo, JD and the ByteDance-owned Douyin. Concerns about the Chinese economy have weighed on Alibaba stock, adding to a slump that began with a Chinese government crackdown on tech firms late in 2020. Coming into the report, Alibaba stock was up about 3% this year but down 14% from its price 12-month ago and 56% lower compared to three years earlier.
For the June quarter, revenue from Alibaba's Taobao and Tmall e-commerce businesses fell 1% year-over-year to 113.4 billion yuan. Sales for the division grew 4% year-over-year in Alibaba's March quarter and 2% in its December quarter.
Still, Alibaba's management highlighted some positive metrics for the domestic e-commerce business. The company achieved "high-single-digit" growth in its gross merchandise value and "double-digital" order growth year-over-year, according to the company press release.
Customer management revenue increased 1% year-over-year to 80.1 billion yuan. The category includes commission on merchants that use Alibaba's platform and is the company's largest source of overall revenue.
Direct sales revenue decreased 9% year-over-year to 27.3 billion yuan. Alibaba's news release pinned the decline on "sales of consumer electronics and appliances due to our planned reduction of certain direct sales businesses."
Elsewhere, sales from Alibaba's cloud computing business increased 6% to 25 billion yuan, up from 3% growth in the March quarter. Alibaba late last year canceled plans to spin out the cloud business, citing American restrictions on exports of advance computing chips.
Alibaba stock has formed a consolidation pattern with a buy point of 90.46, according to IBD MarketSurge charts. But the stock has a meager IBD Composite Rating of 53 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
JD.com: Net Income Up 92%
Meanwhile, JD.com managed to boost earnings despite a modest increase in revenue. Net income increased 92% year-over-year to 12.64 billion yuan, or $1.77 billion.
JD is China's largest e-commerce retailer by overall revenue. Still, e-commerce competition is "fierce in China against the backdrop of weak consumption demand," stock analysts with Deutsche Bank wrote in a client research note prior to JD's report.
Sales for JD's retail business grew 1.5% in the June quarter to 257 billion yuan, a slowdown from 7% retail growth in JD's March quarter.
JD Chief Financial Officer Ian Su Shan said in a news release the company's quarterly results were compared against a "high base in our electronics and home appliances category from last year." However, growth in general merchandise, including supermarket purchases, was "robust," he added.
Along with Alibaba, JD has focused on offering lower prices as Chinese shoppers have remained cautious in their spending.
"We continued to enhance price competitiveness during the promotional season through our supply chain and disciplined approach, as opposed to reliance on subsidies," Shan said in the news release. "As such, our gross margin substantially increased by 137 (basis points) year-on-year to 15.8%, contributing to our record-high operating and net profit on a non-GAAP basis in the quarter."
JD shares have faced struggles similar to Alibaba stock. Coming into the report, shares of JD were down 8% this year and 28% over the past 12 months. Compared to three years ago, JD stock is 61% lower.
JD stock has an IBD Composite Rating of 52 out of best possible 99, according to IBD Stock Checkup.
