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JD had encouraging earnings results – what’s next?

JD managed to score some nice gains following the earnings report. However, the 200-day average poses a major resistance.

JD.com, Inc., a leading supply chain-based technology and services supplier, released its unaudited financial results for the previous quarter.

Focus on earnings

According to the release, net revenues increased by 11.4% from the third quarter of 2021 to $134.2 billion in the third quarter of 2022. Also, the yearly change in net service revenues for the third quarter of 2022 was a 42% increase to $6.5 billion.

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The numbers represent a substantial increase from the second quarter’s 5.4% yearly sales growth in Chinese yuan, which was JD’s lowest quarterly growth ever. In addition, restrictions related to Covid-19 in China severely impacted the corporation during the second quarter.

At the same time, for the third quarter of 2022, operating income was $1.2 billion, up from the corresponding time in the previous year. Non-GAAP2 income from operations for the third quarter of 2022 was $1.4 billionΒ also higher from the same period in 2021. In comparison to the third quarter of 2021, JD Retail’s operating margin before unallocated items increased from 4.0% to 5.2% in the third quarter of 2022.

Finally, the operating cash flow was $6.4 billion for the 12 months ending September 30, higher in the year-on-year comparison. However, free cash flow, which excludes the impact from JD Baitiao receivables included in operational cash flow, was $3.6 billion for the twelve months ended September 30, 2022, down on a yearly basis.

In the twelve months ending September 30, 2022, there were 588.3 million annual active customer accounts, up 6.5% from the twelve months prior when there were 552.2 million.

β€œJD.com’s focus on efficiency across various businesses helped drive healthy growth even when the industry continued to face significant challenges,” said Lei Xu, CEO of JD.com. Looking ahead, we are confident that our well-established supply chain infrastructure, technical capabilities, as well as the social responsibility we shoulder, will continue to enable JD.com to play an important role in the new development phase in the years to come.”

The earnings outcomes are probably going to increase the confidence around a recovery in Chinese equities that has already begun after regulators said last week that they would loosen certain Covid restrictions.

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In a call with investors on Thursday, Alibaba executives stated that although over 15% of their delivery areas across China had encountered unusual or halted logistic services through October and into November, they were beginning to see improvements.

Rally to continue?

The stock price is up more than 60% since its cycle lows three weeks ago, posting a massive bullish reversal. The battle now rages for the 200-day moving average near $58. If the price jumps above that level, we might see another leg higher, targeting previous highs near $68.

On the downside, the support could be in the $54.40 zone, where previous lows are. If not held, we might see another leg lower toward $50.

JD daily chart, Source: AuthorΒ΄s analysis, tradingview.com

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