Expectations were high for Chinese e-tailer JD.com. They did not disappoint investors as the results came in for their first-quarter earnings period.
The online company, which focuses on the Chinese market, has broad support from Walmart and Alphabet and also has a substantial agreement with Tencent Holdings.
JD.com has been a big hit for investors this year, with a 45 percent year-to-date increase in the stock price.
The company announced they also renewed a tie-up that’s been in place with Tencent. The agreement gives the e-tailer access to the Weixin Platform.
The company will end up paying Tencent somewhere near USD 800 million over the next three years. Tencent also gets a cool $250 million worth of A shares for JD.com.
Other vital numbers were the active customer base and product revenue metrics.
JD told analysts that they grew accounts to 310.5 million, a 15% year over year increase. Revenue hit $16.2 billion, up 19% for the same period. Founded by Liu Quingdong in 2005, the company continues to enjoy unparalleled growth.
In the early days, Richard Liu kept his focus on ensuring quality. JD would win over Chinese consumers, who were concerned about receiving quality merchandise for their money.
That attention to detail is what is allowing the company to service over 300 million customers.
The deal with Tencent will allow greater access for JD to the 1.1 billion total users who use WeChat. That could help spur sales to rise sharply as an influx of new shoppers arrives.
JD.com is still growing, just like its primary rival, Alibaba. Company leader Liu Quingdong will need to show investors continued growth to support the current share valuation.
Like Alibaba, JD is looking for more prosperous data deals with partners to help them sell more products. Both companies are employing technology like “facial recognition technology” to deep dive into customer insights.
The idea behind the enhanced data is to offer a personalized shopping experience that will increase the average spend per customers.
The online shopping field in China is maturing, so the future for growth could come from understanding the buyers better than the competition.
The company will also need to deal with discounting from rivals. Retail is always competitive because someone is willing to drop a price substantially to gain new customers.
If a smaller competitor begins to rely on the tactic heavily, it could cut into the two most extensive services. However, customer loyalty is the response to discounting, and that’s why the company is doubling down in that area.
Q1 gains have Wall Street smiling. Analysts expected only 12 cents per share in earnings for JD, but the company came in at 33. That is the type of upside surprise that will put the stock on everyone’s radar.
CEO Richard Liu expressed confidence about keeping the momentum growing thanks to the company’s scale. He has been speaking in recent months about a vision to take the company back to its entrepreneurial days.
Analysts are optimistic that the recent quarter indicates more significant days to come.
The sharply-higher report shows that management is weathering the storm. The Chinese retail market continues to heat up, but as one of the two largest providers, JD is in a position to dominate going forward. The company plans on making operations more efficient to cut costs to create a higher profit margin.
If the firm pulls off that feat, higher share prices will result. The market continues to grow, dragging the two leaders with it as it goes. Investors will continue to eye growth metrics to ensure their investment in JD leads the pack.
This post is sponsored by Paige Schroeder.