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Why Dada Nexus Is Falling Today

By Rich Duprey – Aug 25, 2020 at 12:03PM

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There may be clouds on the horizon for this fast-growing Chinese logistics and retail platform.

What happened

Shares of Dada Nexus (DADA 10.84%) were tumbling 11% in morning trading Tuesday after the Chinese delivery logistics and retail platform operator reported second-quarter earnings after the market closed yesterday.

So what

The decline in the stock seems to be occurring despite Dada reporting that revenue nearly doubled year over year after the number of active customers jumped 71% in the period. The recently IPO'd stock also seems to have met revenue expectations and beaten on earnings, but the outlook for the third quarter may be what underwhelmed.

Declining arrow over $100 bills

Image source: Getty Images.

Now what

Dada Nexus is a fast-growing company, and investor expectations for continued meteoric revenue expansion may have been dashed by management's guidance of year-over-year revenue growth of just 82% to 91%.

While that's a superlative rate by most standards, it represents a slowdown from the 93% jump it just recorded as well as the 109% surge it notched in the first quarter. Even though it has significant partners like PepsiCo on the books, and Walmart was an early investor, the revenue slowdown it's experiencing may have investors concerned about its ability to turn a profit.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dada Nexus Limited Stock Quote
Dada Nexus Limited
DADA
$5.42 (10.84%) $0.53
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WMT
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