Ahead of its earnings report, Alibaba (BABA) peaked at $120. The stock settled in the low $80s when JD.com (JD) posted a revenue slowdown. Its outlook is too weak.
JD posted revenue of $42.8 billion, earning non-GAAP EPADS of 70 cents. Investors did not reward the company for 4% retail segment growth. Retail has the potential to grow by over 10% annually for the next decade. Its Logistics unit could grow at 15% annually at 2% margins.
Alibaba posted revenue of $35.92 billion, up by 2% Y/Y. It earned $2.79 a share non-GAAP. CEO Daniel Zhang said the company expects a recovery in consumer sentiment and economic activity. Alibaba enhanced shareholder value by buying back $3.3 billion worth of shares in the last quarter or 1.3% of its market cap.
Discounts rose for China technology stocks after the steep drop in BABA and JD stocks. The level-headed, patient investor should bet on a limited downside from here.
Savvy investors who sold those two stocks before they fell have house money from the gains. They may bet on buyers stepping in at these levels. That would increase the capital gains potential through a second-round trip of trading.
