In the last few years, China’s economy worsened. Real estate is the primary sector in decline, hurting domestic consumption. Last week, quarterly earnings from Alibaba (BABA), Tencent (TCEHY), and JD (JD) confirmed the country’s weakness. Fortunately, the earnings suggest that a price bottom in their shares approach.
Alibaba closed last week at a higher price after posting earnings per share falling by 5%. Revenue grew by 4% Y/Y to RMB243.24 billion. CFO Toby Xu said the company will continue investing to fuel core growth. It will also cut losses by seeking operating efficiency.
Tencent, a gaming firm, posted Q2 profits rising by 82% to RMB 47.63 billion. Revenue increased by 8% Y/Y to RMB 161.12 billion. TCEHY stock is too cheap at these levels. As investors recognize its value, the stock should rise.
JD.com, an e-commerce firm like Alibaba, posted non-GAAP EPADS of $1.29. Revenue rose by 1.2% Y/Y to $40.1 billion. Importantly, its operating cash flow grew by 40.9% Y/Y to $10.2 billion. It ended the quarter with $7.7 billion in free cash flow. To increase in value, JD’s stock buyback should help end the underperformance of 2024.
Chinese consumers may increase spending as its economy stabilizes. That benefits JD the most since it operates in that saturated market.
