Growth in active customers compounded by robust revenue growth and margin expansion are some of the reasons JD.Com Inc. (NASDAQ:JD) is exploding in the market. Investor sentiments in the stock have continued to edge higher, depicted by a 100% plus rally since the start of the year.
New Customer Growth
The Chinese e-commerce heavyweight is coming off yet another blockbuster quarter, whereby results affirm long term prospects and growth metrics in the burgeoning e-commerce market. Revenue in the quarter rose 29% year-over-year to $25.7 billion, beating consensus estimates by $610 million. Adjusted net income was up 80% to $800 million or $0.50 a share.
The impressive numbers could be attributed to, among other things, JD.com becoming a key player in the burgeoning Chinese e-commerce space. The company’s annual active customers rose 32% to 441.6 million marking the highest growth rate in three years.
The growth came as a surprise as JD.com has always struggled to attract customers in the third quarter, given the lack of major shopping holidays. However, this year, the Chinese e-retailer pushed into lower-tier cities, conversely attracting more customers. New customers from low tier cities accounted for 80% of new users.
Likewise, the company’s premium subscription tier that offers discounts, free shipping coupons, and perks reached 20 million subscribers in the quarter. The ecosystem could lock in more shoppers and support JD.com prospects in online pharmacy and telehealth systems.
Revenue Growth
Customer growth continues to strengthen the JD.com revenue base that continues to accelerate. Sales growth stems from robust sales of general merchandise led by online grocery and healthcare products. Likewise, the retailer is making a name for itself on the sale of home appliances and consumer electronics.
Revenue surging 43% came as the retailer served more third party customers. While the Chinese retailer is yet to provide guidance for its fourth quarter, analysts expect revenue to rise 36% as Singles Day November shopping bonanza brought in more shoppers.
Amid the robust revenue growth margin expansion and customer growth, its price to earnings ratio is still lower than its earnings growth. Similarly, the stock looks undervalued despite the recent spike to record highs.