By Jiahui Huang

JD.com shares dropped in Hong Kong despite the Chinese e-commerce giant's strong earnings beat, dented by concerns that its entry into the food-delivery space dominated by Meituan will pressure its profitability.

The stock fell as much as 5.9% in early trading Friday before clawing back some of its losses. It was 1.8% lower at midday, underperforming the Hang Seng Index's 0.6% gain and the Hang Seng Tech Index's 1.3% rise.

The company late Thursday reported stronger-than-expected results for the final quarter of 2024. Net profit nearly tripled from a year earlier to 9.85 billion yuan, equivalent to $1.36 billion, and revenue jumped 13% to 346.99 billion yuan as consumer spending rebounded, it said.

However, some analysts cautioned about higher expenses as the online retailer ventures into China's highly competitive food-delivery business. JD.com officially launched JD Takeaway last month, offering zero commissions this year for restaurants that register with the platform as it looks to attract merchants.

"Its entry into a sector dominated by Meituan is expected to gradually increase operating costs and add pressure to the bottom line," Zephirin Group analyst Lenny Zephirin said.

JD.com's retail segment, which makes up most of its revenue, also logged higher expenses in the fourth quarter, which includes major online shopping events like Singles' Day.

"The company has spent significantly on discounts and promotions," Zephirin said, noting that JD Retail's expenses increased by a substantial 14% during the quarter.

Still, as one of China's largest e-commerce players, JD.com will likely continue benefiting from Beijing's expanded trade-in program for consumer goods. To boost consumption, Chinese policymakers earlier this week said they would double the support for the program to 300 billion yuan in 2025.

HSBC Global Research analysts led by Charlene Liu said they expect the government subsidies to accelerate JD.com's top-line growth by 4-7 percentage points this year.

"We believe revenue momentum in 1H25 will remain robust and see potential upward earnings revision in JD Retail," Daiwa analysts John Choi and Robin Leung wrote in a note.

Both HSBC Global Research and Daiwa maintained buy ratings and raised their target prices on the stock.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

March 06, 2025 23:59 ET (04:59 GMT)

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