Alibaba, Tencent Shares Respond Following JD.com's Q2 Earnings
China-based JD.Com Inc(ADR)'s (NASDAQ: JD) results and outlook cast its shadow on other Chinese companies. The favorable sentiments are evident in shares of Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (OTC: TCTZF) gaining about 2.5 percent and 1.5 percent, respectively.
While some companies try to beat EPS by controlling expenditures, they struggle to report the kind of revenue the Street estimates. In the case of JD.com, it generated revenue of $9.82 billion that was better than the Street predicted. This may have boosted confidence that consumer spending in China is intact or at the expected level.
Interestingly, JD.com results came on the heels of improving consumer confidence sentiments from 99.80 in the preceding period to 102.90 points. Additionally, retail sales recorded 10.6 percent growth on a year-over-year basis and 0.92 percent uptick on a month-over-month basis.
Aside from that, China's GDP increased 6.7 percent topping the 6.6 percent predictions by economists. These sentiments have helped JD.com to report better than estimated revenue. These data also encouraged investors to expect favorable results from Alibaba.
On Thursday, Alibaba will report its first quarter results. Street analysts' expect the company to report EPS of $0.63 on $4.54 billion revenue.
Citi's Alicia Yap expects the Chinese company to report in-line EPS on 48.6 percent revenue growth. The brokerage boosted its estimates ahead of the results indicating that the outlook would be better than previously expected. The analyst boosted her price objective from $98 to $105, indicating a possible upside potential of more than 20 percent.
Tencent is another Chinese firm that has potential to gain from the improved consumer confidence and economic conditions.
As a result, shares are trading up on Wednesday. While Alibaba is trading up by $2.20, or 2.58 percent, to $87.44, Tencent advanced $0.30, or 1.24 percent, to $24.50.
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