What happened
Shares of the Chinese real estate platform KE Holdings (BEKE -1.01%) had fallen roughly 24% as of 3:09 p.m. ET today after the company reported earnings results for the fourth quarter of 2021.
So what
KE Holdings in the fourth quarter reported a loss equivalent to diluted earnings per American depositary share of -$0.12. Total revenue for the quarter came in at nearly $2.8 billion. While earnings missed consensus estimates, revenue beat.
Image source: Getty Images.
Stanley Yongdong Peng, chairman and CEO of the company, said the following in a statement:
Embracing the significant changes in 2021, we endeavored to look inward for answers and transform our organization, in response to the higher requirements put forward to us by consumers' fast evolving demand, as well as our country and society in this era.
Management is guiding for the company to generate revenue of roughly $1.9 billion in the current quarter, which would be a decrease of between nearly 40% and 44% from the first quarter of 2021. The guidance incorporates current market conditions as well as recent policies imposed by the government that have made conditions more challenging.
Now what
China's real estate market has had a tough go of it as property developers like the China Evergrande Group have racked up high levels of debt that have made investors concerned about the real estate market's overall stability in China. Investors have also long suspected a bubble, and home sales have really been on the decline recently.
CFO Tao Xu said on KE's earnings call that management expects to start seeing housing transactions recover and the market to bottom in the current quarter.
While a rebound is expected, given everything happening in China's real estate market, I would probably stay on the sidelines until there is a clearer picture of the longer-term outlook. Because China's real estate market, like other sectors in the country, can be heavily impacted by government intervention, I would recommend understanding the regulatory landscape before investing as well.
