Why Shares of JD.com Jumped Today

By Markets Fool.com

Image source: JD.com.

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What happened

Shares of Chinese e-commerce company JD.com (NASDAQ: JD) jumped on Tuesday following a positive third-quarter report. JD.com beat analyst estimates for both revenue and adjusted earnings, which drove the stock about 12.5% higher by 11 a.m. EST.

So what

JD.com reported third-quarter revenue of RMB60.7 billion, or $9.1 billion, up 38% year over year and well above analyst expectations of $8.86 billion. Gross merchandise value rose 43% year over year to $23.8 billion, while the number of annual active customer accounts jumped 57% to 198.7 million. JD.com fulfilled 401.2 million orders during the quarter, excluding virtual items, up 55% from the prior-year period.

"We are delighted to announce another strong quarter of results, with solid growth in revenue and new users, as Chinese consumers increasingly prefer to shop online for high-quality products," said JD.com CEO Richard Liu. "Long-term investment in our business model is clearly winning over the market and changing the dynamics of e-commerce inChina. Looking ahead, we will continue to pursue growth while stepping up our investment in cutting-edge technologies to further enhance user experience."

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Non-GAAP earnings per share came in at $0.03, compared to analyst expectations of a loss of $0.06. On a GAAP basis, JD.com posted a loss of $0.10 per share. GAAP operating expenses rose by 36.5% year over year, a bit slower than revenue growth.

Now what

JD.com expects to produce revenue between RMB75.0 billion and RMB77.5 billion during the fourth quarter, representing year-over-year growth between 37% and 42%. JD.com also announced along with its report that it was exploring a possible reorganization of JD Finance, the company's internet finance business.

Rapid growth continued during the third quarter for JD.com, and profitability remained minimal. Operating margins are improving, and CFO Sidney Huang expects that to continue. "We expect further margin expansion in the years ahead as we focus on technology-driven growth initiatives and strategic investments that lay the groundwork for our long-term industry leadership."

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