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JD.com Stock Firms After Stronger-Than-Expected Adjusted Profit

JD.com stock had tumbled 16% in a month amid China’s criticism and increased regulation of the country’s tech giants.
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JD.com  (JD) - Get JD.com, Inc. (JD) Report shares on Monday firmed after the Chinese e-commerce titan reported stronger-than-expected second-quarter results.

The stock had tumbled 16% over the past month amid the Chinese government’s harsh criticism and increased regulation of the country’s tech giants.

JD.com recently traded at $64.15, up 0.8%.

For the second quarter, net income registered 794.3 million yuan, or 0.5 yuan per American depositary share, down from 16.45 billion yuan, or 10.47 yuan per ADS, in the year-earlier quarter.

The latest adjusted profit totaled 2.9 yuan per ADS, easily topping the FactSet analyst consensus estimate of 2.6 per ADS.

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Revenue surged 26% to 253.8 billion yuan (US$39 billion) from 201.1 billion yuan. The analyst consensus called for 248.3 billion yuan in the latest quarter.

Service revenue gained 49%, and product revenue rose 23%.

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Higher fulfillment, marketing, research and development and general and administrative costs weighed on profit.

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Prior to the earnings report, Morningstar analyst Chelsey Tam put JD.com’s fair value at $106.

“JD.com's moat rating is none, as we don’t believe that the company enjoys a cost advantage moat source,” she wrote in a commentary.

“JD.com still possesses a cost advantage over offline retailers, but we think the current competition comes primarily from other e-commerce players, such as Alibaba  (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report, Pinduoduo  (PDD) - Get Pinduoduo, Inc. Sponsored ADR Class A Report, and Suning.com.”

On the plus side, “JD.com's key competitive advantage is its fulfilment capacity. We believe it owns the largest self-built nationwide fulfilment networks,” Tam said.

“This large, self-controlled fulfillment infrastructure has enabled JD.com to deliver merchandise in a timely, reliable manner.”

Pinduoduo is scheduled to report for the second quarter on Tuesday before the market opens. The stock at last check was 3.3% higher at $79.80.

Alibaba shares recently ticked up 0.2% to $158.29.