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Why Dada Nexus Soared Today

By Eric Volkman - Jun 8, 2021 at 4:56PM

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Investors liked the company's latest quarterly results and its new share buyback program.

What happened

The American depositary shares (ADS) of Dada Nexus (DADA -0.30%) zoomed higher on a busy Tuesday for the Chinese company. A combination of factors powered those ADS nearly 14% higher on the day.

So what

The first, and clearly most influential, factor in Dada's Tuesday triumph was earnings. The food delivery company published its first-quarter figures after market close on Monday, revealing that it grew revenue 52% year over year to 1.67 billion yuan ($261 million). That was on the back of gross merchandise volume (GMV) that rose 79% to just over 28 billion yuan ($4.4 billion).

A child about to bite into a sandwich.

Image source: Getty Images.

Due to higher expenses, Dada's non-GAAP (adjusted) net loss deepened to just over 618 million yuan ($97 million) -- 0.65 yuan ($0.10) per share -- from the nearly 194 million yuan ($30 million) shortfall of the year-ago quarter.

Dada is expecting higher revenue growth in its current quarter (Q2) of 72% to 78%. This was likely a major impetus behind the bull run on the stock Tuesday. The company did not provide a profitability forecast.

Another factor in Dada's popularity on the day is undoubtedly the share buyback program it's launching. The company will repurchase up to $150 million worth of its ADS over the next 12 months to be funded with cash on hand.

Now what

Dada's revenue growth momentum is very encouraging, and the company operates in a massive, underserved country. While investors should keep an eye on that still very red bottom line, Dada's prospects are nevertheless very bright.

 

Eric Volkman 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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