Monday, August 17, 2020

Will JD.com Rally After Q2 Results?

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News shaping
the markets today

     

What’s happening: JD.com is scheduled to release its second-quarter results before the opening bell today.

What happened: People staying home amid the pandemic has boosted the ecommerce market. JD.com has been among the main beneficiaries of this trend, being the second largest B2C online retailer in China in terms of transaction volume and revenue, behind only Alibaba-run Tmall.

JD.com has exceeded estimates in each of the previous four quarters and investors are expecting the positive momentum to continue. There are concerns, however, around the deteriorating US-China tensions and the recent treatment of Chinese companies by the Trump administration.

What are expectations: JD.com is expected to report growth in both sales and earnings for the second quarter.

  • Revenues are projected at around $27.39 billion, up sharply from $21.89 billion in the same quarter last year.
  • Analysts expect JD.com to report quarterly earnings of 38 cents per share, versus 33 cents per share in the year-ago quarter.

Why it matters: JD.com has been making huge investments in logistics over the last few years to expand its foothold across geographies.

The Chinese ecommerce giant, which has so far been operating as a direct sales online portal, recently acquired a substantial stake in supply chain management firm Li & Fung. The latest move is expected to help JD.com improve its supply chain network.

JD.com has been focusing on lower-tier cities, using technology initiatives to improve the shopping experience in these regions. The company recently expanded its 24-hour delivery services in such cities. This approach is expected to have enabled the company to beat competition and boost its second-quarter results.

JD.com also announced an alliance with makers of gaming phones to capitalise on the higher demand for such smartphones in China.

The company has also integrated AI technology into its warehouses, which is expected to have benefitted deliveries considerably during the second quarter.

Despite its phenomenal performance, uncertainties remain around the Trump administration’s planned crack down on US-listed Chinese companies, which saw severe repercussions for Tencent and ByteDance last week.

How shares responded: Shares of JD.com slipped 0.8% to close at $62.06 on Friday. The stock has gained around 27% over the last three quarters and is up a whopping 110% in the past 52-week period.

What to watch: With various ecommerce companies benefitting from the pandemic-induced lockdowns and social distancing measures, investors expect JD.com to report strong results for the latest quarter. The company’s continued focus on improving technology and its logistical network might drive results ahead.

The Markets Today

     

Gold trading will be in focus today, after the yellow metal recorded its first weekly decline in ten weeks.

Context: Gold futures closed lower on Friday, with the metal also registering a loss during the week following some strength seen in US Treasury yields.

Details: Traders were keeping a close eye on economic reports from the US last week. Although the country’s retail sales fell short of expectations, data on US productivity and industrial production came in better than expected.

The yield on the US 10-year Treasury note traded at 0.693% on Friday, after jumping to its highest level in eight weeks in Thursday’s dealings and versus 0.562% last Friday.

Gold futures for December delivery dropped 1.1% to close at $1,949.80 an ounce on Friday, following a 1.1% rise on Thursday. The precious metal recorded a weekly decline of around 3.9%, snapping the nine-week winning streak. Last Tuesday, gold had also suffered its worst single-day dollar decline since April 15, 2013.

Meanwhile, silver prices dipped 5.9% to settle at $26.089 in the prior session, after climbing 6.7% on Thursday. The white metal lost 5.3% last week.

Among other metals, September copper rose 1.9% to reach $2.859 a pound on Friday, recording a weekly gain of 2.4%. However, October platinum declined 2.4% to $959.10 an ounce, shedding 1.2% in the week.

What to watch: Markets will focus on global economic reports and continue to assess the covid-19 numbers, with total cases surpassing 5.4 million in the US.

Gold is expected to rebound slightly today, following last week’s losses. Gold futures traded higher by 0.2% to $1,953.30 an ounce in European session.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.2%, 0.1% and 0.2%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Canada’s new motor vehicle sales and foreign stock investment, Russian industrial production as well as the US New York Empire State manufacturing index and NAHB housing market index.