Kuaishou Technology Shares Drop on Slower E-Commerce Growth

By Sherry Qin

Kuaishou Technology's shares fell sharply in Hong Kong after growth in its e-commerce business slowed in the second quarter amid weak consumption in the world's second-largest economy.

Shares of the Beijing-based short-video app operator declined 10% to 39.95 Hong Kong dollars by midday Wednesday, on track for their largest daily percentage loss since October 2022.

Kuaishou, which competes with TikTok parent ByteDance, said Tuesday that its net profit more than doubled and adjusted net profit surged 74% as revenue rose 12% to 30.975 billion yuan, equivalent to US$4.34 billion.

However, its gross merchandise value increased 15% from a year earlier, slowing from the 28% growth in the previous quarter.

In an earnings call after the results, Kuaishou Chief Executive Cheng Yixiao attributed the slower GMV growth to "a short-term slowdown in consumer demand and heightened competition in domestic e-commerce."

Analysts said the GMV weakness was expected, given the weak consumer sentiment observed during the June shopping campaign.

Weaker GMV growth might continue in the second half of the year given persistent macro headwinds, Citi analysts said in a research note. Citi now projects Kuaishou's second-half GMV growth at 14% and lowered its target price on the stock to HK$67.00 from HK$69.00.

A bright spot for Kuaishou was its gross margin, which rose to a record 55.3% as it continued to shift its revenue mix to higher-margin businesses.

Daiwa analyst John Choi expressed optimism about Kuaishou's margin expansion, though he said in a note that the company's GMV performance and shelf-based e-commerce progress will be "key short-term catalysts."

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

August 21, 2024 01:38 ET (05:38 GMT)

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