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Why Stock Popped Today

By Jeremy Bowman - Mar 2, 2020 at 5:27PM

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Shares of the online retailer rose on a strong report and resilience in the face of the novel coronavirus.

What happened

Shares of (JD 1.84%) were surging after the Chinese e-commerce specialist turned in a better-than-expected fourth-quarter earnings report and gave guidance that showed the company weathering the COVID-19 coronavirus outbreak well.

As a result, the stock finished the day up 12.4%.

A deliveryman delivering several packages on a motorbike

A deliveryman. Image source:

So what

China's leading direct online retailer showed off another round of strong growth in the fourth quarter. Revenue rose 26.6% to $24.5 billion, well ahead of estimates at $23.9 billion. Services revenue, which is made up of higher-margin businesses like its third-party marketplace, advertising, and third-party logistics, jumped 43.6%. 

Adjusted operating income more than doubled in the period to $101.1 million, but adjusted earnings per share of $0.08 were up slightly from $0.07 a year ago as interest and tax expense grew. That result also beat analyst estimates by a penny. 

Investors were also anxious to see how the company was performing during the coronavirus outbreak, which began after the end of the fourth quarter. CEO Richard Liu said:

Since late January, we've spared no effort in the fight against COVID-19 in China. Our leading supply chain and logistics network have been called upon to address unmet needs across China. We've been ensuring consumers' livelihoods while partnering with public institutions to ensure access to emergency supplies.

Now what

For the current quarter, JD sees revenue growing by at least 10%, a reflection of the slowdown in the Chinese economy during the outbreak, but that forecast also seemed to inspire investor confidence in the Chinese stock, since much of the country has been under lockdown for at least part of the quarter. 

The slowdown in revenue growth is understandable given the challenges from COVID-19, but the company is also proving its value as it's helped deliver medical supplies to Hubei Province, the epicenter of the catastrophe, and helped relief organizations to maintain steady supply. It also launched JD Health, which offers 24/7 free online medical consultation.

There are signs now that the spread of COVID-19 in China is slowing and life is starting to return to normal. Starbucks, for example, has reopened most of its stores there. Assuming the recovery continues, JD's results and its growth rates should return to normal later in the year.

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