Earnings preview: Muted sentiment towards tech sector weighs on JD.com

Most China-based tech firms are coming out with an unimpressive outlook for their upcoming fiscal quarters while posting muted results for the June quarter, reflecting the softness in local markets and the continuing fallout from the Turkish financial crisis. The downbeat market sentiment has affected the stocks of e-commerce majors like Alibaba (BABA) and JD.Com (JD) in the run-up to their earnings releases.

JD.com dropped more than 4% in early trading Tuesday amidst apprehensions over the potential impact of the negative factors on its earnings. Analysts expect the company to post earnings of $0.119 per share when it reports second quarter results on August 16 before the market opens, recovering from last year’s $0.052-per share loss. Driving the projected recovery, sales are seen growing by about 38% to $19.31 billion.

Meanwhile, there are concerns that profitability could be dragged by the ongoing investments for developing e-commerce markets outside China and broadening fulfillment capability and product offerings. Taking a huge step in that direction, the company recently joined hands with Google (GOOGL) to have its products listed on the latter’s shopping site, thereby ensuring increased visibility in the overseas markets. The outlook for online direct sales, which account for more than 90% of the total revenues, continues to be bullish.

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For the first quarter ending March 31, 2018, the company posted earnings of $0.11 per share, which fell short of Wall Street estimates. Revenues, meanwhile, jumped 33% year-on-year to about $16 billion and exceeded expectations, aided by robust online direct sales.

E-commerce behemoth Alibaba, which is slated to report earnings on August 23, had a dismal performance at the stock market today, losing about 3%. Vipshop Holdings (VIPS), another leading online marketplace, was down 16% after the company guided its third-quarter earnings below consensus.

JD.com shares have been losing progressively since the beginning of 2018, barring a few instances of short-lived recovery, registering an overall decline of 22%. The downtrend gathered steam during the regular trading session Tuesday and the stock was down about 3.5% in the final hour of trading.

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