Shares of JD.com (NASDAQ: JD), the Chinese e-commerce giant, were falling in response to a disappointing earnings report from its close competitor and peer, Alibaba (NYSE: BABA).
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
Investors were hoping that Alibaba’s December quarter would give them some relief from a brutal sell-off in Chinese tech stocks, but that was not the case. The disappointing earnings report from Alibaba indicates that the Chinese e-commerce sector remains weak.
Alibaba’s revenue in the quarter grew just 5% to $36.7 billion, in line with estimates. The slow revenue growth, particularly in its core commerce group, Taobao and Tmall, which competes directly with JD, bodes poorly for JD’s upcoming fourth-quarter earnings report in March. In its report, Alibaba mentioned a successful 11.11 Shopping Festival but fell short on order volume and earnings per share.
Implications for JD.com
The revenue growth at both Alibaba and JD has slowed sharply in recent quarters, owing 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, and that’s likely to weigh on JD’s results as well, as it managed just 1.7% revenue growth in its third quarter.
We’ll learn more when JD releases its third-quarter earnings report, which is expected in March. Analysts see revenue falling 1.5% to $42.1 billion, and earnings per share slipping from $0.70 to $0.63. However, low expectations may provide some solace to JD investors heading into the report.
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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.