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What happened

Shares of (NASDAQ: JD) were falling last month as the Chinese e-commerce company reported middling results in its second-quarter earnings report and as Chinese economic data remained weak, causing doubts about its ability to mount a full recovery.

According to data from S&P Global Market Intelligence, the stock finished down 20% in August. As you can see from the chart below, the stock slumped through most of the first half of the month before stabilizing in the second half.

JD data by YCharts

So what

Stocks fell broadly in the first half of August as fears about rising interest rates persisted and weak economic data out of China contributed to a sustained sell-off.

China stopped releasing a key data point on youth unemployment, sparking concerns that the situation was worse than it appeared. Meanwhile, industrial output and investment were weaker than expected and aggregate demand also declined.

Separately, worries spread about the health of China’s property sector, and J.P. Morgan predicted another round of defaults.

In its second-quarter earnings report, reported continued sluggishness, and the stock fell 3% on the news even as it topped estimates.

JD said revenue in the quarter rose 7.6% to $39.7 billion, ahead of expectations at $38.7 billion, with strong growth from the services segment, where revenue was up 30.1% to $7.5 billion. However, revenue at the core JD retail business increased just 5% in the quarter, a reflection of the broader weakness in China. Sales of general merchandise, which includes groceries, were down 10% to $11.2 billion.

On the bottom line, the company per-share profit jumped by 51.5% to $0.74, ahead of the consensus at $0.66.

CEO Sandy Xu said that the number of marketplace merchants more than doubled in the quarter, showing strong growth in its third-party marketplace business.

Several analysts lowered their price targets on the stock in the aftermath of the report, a reflection of the stock’s slide in recent months, competition in the Chinese e-commerce industry, and weakness in the Chinese economy.

Now what

Considering the long-term growth opportunity for JD, which has built an expansive logistics network in China, the upside potential for the stock still seems appealing, but it will likely need a recovery in the broader Chinese economy to drive the stock significantly higher.

Keep your eye on retail operating margins and top-line growth at JD as improvement in those metrics should push the stock higher.

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