What happened
Shares of JD.com (JD -0.81%) were falling today after the Chinese e-commerce giant reported fourth-quarter earnings this morning. Though the results were solid overall, revenue growth dropped to its slowest pace in six quarters, and broader fears about slowing economic growth in China seemed to weigh on the stock.
Additionally, a prospective delisting announcement for five Chinese stocks seems to have spooked the market as well, as peers like Alibaba Group Holding and Pinduoduo are also down sharply today.
As of 11:50 a.m. ET on Thursday, JD.com stock was down 15.8%.
A JD.com self-driving delivery vehicle. Image source: JD.com.
So what
JD said that revenue in the quarter grew 23% to $43.3 billion, which matched estimates. Revenue growth from services, which include logistics and its third-party marketplace, slowed to 28.3%, reaching $6.5 billion. That might have disappointed investors as the segment is seen as one of its biggest growth opportunities.
On the bottom line, adjusted operating income expanded from $200 million to $400 million, and adjusted operating margin in JD Retail, which makes up the majority of its business, increased from 1.9% to 2.1%. On an adjusted basis, the company reported a per-share profit of $0.35, which was up from $0.24 in the quarter a year ago and better than the consensus at $0.24. The company reported a GAAP loss for the quarter but that was related to a non-cash goodwill impairment in a company it's invested in.
Active customer accounts increased 21% to 570 million.
Separately, the Securities and Exchange Commission (SEC) cited five Chinese stocks, including Yum China Holdings, for pending delisting under the Holding Foreign Companies Accountable Act. That move seemed to lead investors to believe that more Chinese stocks could be delisted soon as well.
Now what
JD's earnings report seemed to be satisfactory, so the excessive sell-off today might have more to do with broad fears about China stocks . The companies cited by the SEC have three weeks to submit evidence that they can comply with SEC auditing rules, but the notice is just one more reason many investors have started to think Chinese stocks are off-limits.
While JD has already listed in Hong Kong, a U.S. delisting would still hurt, and the regulatory crackdown in China also remains a risk.
