What happened
Shares of JD.com (JD 5.16%), China's second-largest online retailer, plummeted this week after the company reported its fourth-quarter results and as investors processed news about some China-based companies potentially being delisted from U.S. stock exchanges.
The tech stock is down by 21% since last week, according to data provided by S&P Global Market Intelligence.
So what
JD.com reported non-GAAP (adjusted) earnings of $0.35 per share, which easily outpaced Wall Street's consensus estimate of $0.24 per share. Additionally, the company's fourth-quarter sales of $43.3 billion were on par with analysts' consensus estimate.
Image source: Getty Images.
As Motley Fool contributor Jeremy Bowman pointed out yesterday, the company's year-over-year revenue increase of 28.3%, while good, was the slowest growth in six quarters.
In addition to that, JD.com investors are also concerned that several Chinese stocks have been mentioned by the Securities and Exchange Commission (SEC) as companies that have failed to adhere to the Holding Foreign Companies Accountable Act (HFCAA).
The act allows the SEC to delist companies from U.S. stock exchanges if they don't allow American regulators to review audits of their financial records for three consecutive years.
The potential for some Chinese stocks to be delisted sent many other Chinese tech stocks tumbling on the news, including JD.com.
Making matters even worse for JD.com investors is the fact that four analysts -- from HSBC, Citigroup, Barclays, and Morgan Stanley -- all cut their price targets for JD.com's stock today.
Now what
While JD.com's fourth-quarter results weren't all that bad, investors are clearly looking beyond the company's financial picture to broader market concerns. Any instability in the market from Chinese stocks is going to cause volatility with other Chinese companies, at least in the short term.
JD.com investors should then prepare for some more share price swings right now as investors try to determine the long-term effects of potential Chinese stock delistings, even if JD.com isn't itself at risk of being delisted.
