Shares of JD.com (NASDAQ:JD) initially surged last week after the Chinese retail giant's first-quarter numbers crushed analysts' expectations. However, those gains quickly faded as escalating U.S./China trade tensions sparked a marketwide sell-off.

Should investors tune out the current market noise and buy the stock, which trades at less than 0.5 times next year's sales estimate?

Let's examine four key takeaways from JD's first-quarter earnings report to find out.

JD's autonomous delivery robots in a garage.

Image source: JD.com.

1. Slowing, but stabilizing, revenue growth

JD's revenue rose 21% annually to 121.1 billion yuan ($118 billion), clearing estimates by 1.1 billion yuan but marking its slowest revenue growth since its IPO back in 2014. Its annual active customers rose 3% to 310.5 million, but that also marked a deceleration from its previous quarters.

Metric (both YOY)

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Annual active customers growth

27.6%

21.5%

14.6%

4.4%

2.9%

Revenue* growth

33.1%

31.2%

25.1%

22.4%

20.9%

*In renminbi. Data source: JD quarterly reports. YOY = Year over year. 

However, JD expects its second-quarter revenue to rise 19% to 23% annually, buoyed by stronger sales in April and an easier comparison to the previous year, when a long weekend and the World Cup throttled online purchases.

That forecast indicates that JD's growth is stabilizing, but the company also attributed some of its robust April sales to seasonal promotions and bigger marketing campaigns -- which could weigh down its margins.

2. Solid net income growth

Nonetheless, JD's gross margin rose 90 basis points annually to 15% during the first quarter, thanks to improved margins at its core JD Retail (formerly JD Mall and JD Logistics' third-party services) business.

JD's non-GAAP operating margin also doubled to 1.6% thanks to an expanding gross margin, the expansion of JD Logistics (its first-party logistics service), and layoffs. As a result, its non-GAAP net income surged 150% annually to 2 billion yuan ($290 million), or 2.23 yuan per share -- which crushed expectations by 1.40 yuan.

JD's free cash flow also turned positive during the first quarter at 1.3 billion yuan ($190 million), thanks to its improved operating cash flow and divestments of several projects.

JD didn't provide guidance for its margins or earnings for the second quarter, and CEO Richard Liu admitted that its net profit was a "little bit high" during the conference call. Liu also stated that JD would "never ever stop investing" in its long-term initiatives like automated logistics.

JD's autonomous warehouse robots.

Image source: JD.com.

Therefore, investors shouldn't expect JD to keep generating massive earnings growth or consistent profits just yet. However, Wall Street expects JD's second-quarter earnings to rise 20% and for its full-year earnings to rise 63%. Both estimates indicate solid growth rates for a stock which trades at about 30 times forward earnings.

3. An expanding services business

JD is growing its higher-margin services business -- which includes JD Logistics' services for other retailers, marketplace ads, the "Prime-like" JD Plus membership program, and JD Cloud -- to offset the lower margins of its core marketplace.

JD's service revenues rose 50% in 2018 and accounted for 10% of its top line. During the first quarter, its net service revenue rose 44% annually, led by 91% growth in its "logistics and other" service revenues. If that growth persists, JD's profitability should improve and enable it to reinvest more of its cash into the expansion of its ecosystem.

4. Tencent still believes in JD.com

Tencent (OTC:TCEHY), JD's largest investor, also renewed its strategic partnership with the e-commerce company for three years. Tencent will continue to integrate JD's e-commerce platform into WeChat, the top messaging app in China, and share advertising, membership service, and communication resources with the company.

JD will issue over $250 million of its Class A shares to Tencent during those three years, and the two companies plan to spend over $800 million on their collaborative efforts. The renewal isn't surprising, since Tencent, JD, and Walmart -- another top JD investor -- have been pooling their resources to counter Alibaba, the 800-pound gorilla of China's e-commerce and cloud markets.

The bottom line

JD's stock probably won't rebound until trade relations improve between the U.S. and China. However, its core business is improving and its valuation is reasonable. Patient investors who accumulate shares of JD today -- as other investors shun Chinese stocks -- could reap big profits over the next few years.