Alibaba Group Holding Ltd (BABA)

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2 China-Based Stocks in the Midst of Steep Pullbacks
By: Schaeffer's Investment Research | November 14, 2024

• Shares of Alibaba and JD.Com are both notably lower this quarter

• JD.Com reported earnings today, and Alibaba enters the confessional tomorrow

While Wall Street has enjoyed a post-election rally, U.S.-listed Chinese stocks haven't fared so well. Donald Trump's U.S. presidential victory came with promises of higher tariffs for China, but the country's fiscal stimulus package is also weighing on equities.

Specifically, China's National People's Congress announced 10 trillion yuan ($1.4 trillion) in a debt swap program to help local governments overcome debt burdens, but investors were underwhelmed by the lack of measures to help the housing market and personal consumption.

For JD.Com Inc (NASDAQ:JD) and Alibaba Group Holding Ltd - ADR (NYSE:BABA), earnings are also a factor.

JD.Com Shows Mixed Quarterly Results

E-commerce giant JD.Com reported third-quarter results, and its quarterly profit and revenue jumped 48% and 5.1% year over year, respectively, though the latter fell short of expectations. A rebound in electronics and home appliances, as well as sustained momentum in general merchandise helped drive its earnings beat, but fears of China's economic position are dragging JD.

The security was last seen 4.2% lower at $34.20, extending its quarter-to-date dip to 14.3%. Shares notched a roughly 19-month high of $47.08 on Oct. 24, but the election and stimulus news resulted in a sharp pullback. JD.com stock is now pacing for its worst weekly performance since May.

Options traders are lighting up JD's options pits. So far, 124,000 calls and 37,000 puts have traded hands -- 3 times the average intraday volume. Most popular is the December 45 call, followed closely by the January 17, 2025 50-strike call.

What to Expect from Alibaba's Earnings Report

Alibaba is slated to report fiscal second-quarter results before the open tomorrow, Nov. 15. Per Zacks, the e-commerce name is expected to show earnings of $2.26 per share on revenue of $33.47, the former an 8.63% year-over-year profit gain and the latter representing a 5.61% 12-month rise.

Alibaba stock has a mostly subdued post-earnings past, falling lower after five of its last eight reports. Plus, after its August report, BABA managed a meager 0.1% gain. Over the last two years, the security averaged a 4.9% next-day swing, regardless of direction, which is nearly half the 8.7% move options traders are pricing in this time around.

Ahead of the event, the security is 1.6% lower at $90.54. Shares have managed just one positive weekly performance since the week ended Oct. 11, and are pacing for another substantial weekly drop. BABA sports a 14.7% deficit for the quarter, but remains 17.8% higher since the start of 2024. Year over year, Alibaba stock is up 4.9%.

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