Dada Nexus Ltd

Dada Nexus Ltd (NASDAQ: DADA) is a China-based holding company principally involved in the operation of local on-demand retail and delivery platforms. The Company’s main platforms are JD-Daojia (JDDJ) and Dada Now. JDDJ is an on-demand retail platform operated in China. It facilitates digitalized transformation for retailers and brand owners on selling products through online channels.

Key Business & Financial Updates

• Financial Results for Q2 2024: Dada Nexus Limited, a leading on-demand retail and delivery platform in China, announced its unaudited financial results for the second quarter ending June 30, 2024. Total net revenues for the quarter amounted to RMB2,349.9 million, a decrease from RMB2,596.8 million in the same period of the previous year. This decline was primarily driven by lower revenues from JD NOW, which generated RMB912.4 million in the second quarter of 2024, compared to RMB1,616.4 million in the corresponding quarter of 2023. The reduction in JD NOW's revenues was due to decreased online advertising, marketing services, and fulfillment services following the rollout of a delivery fee waiver for orders exceeding RMB29.
• Growth in Dada NOW Revenues: Despite the decline in overall revenues, Dada NOW experienced significant growth, with net revenues increasing by 46.6% from RMB980.4 million in the second quarter of 2023 to RMB1,437.5 million in the second quarter of 2024. This growth was mainly driven by a rise in order volumes for intra-city delivery services provided to various chain merchants. Dada NOW's strong performance underscores the company's ability to expand its service offerings and meet increasing demand in the retail and delivery sectors.
• Cost and Expense Overview: Total costs and expenses for the second quarter of 2024 amounted to RMB2,667.0 million, a slight reduction compared to RMB2,804.1 million in the second quarter of 2023. Operations and support costs increased to RMB1,735.7 million, largely due to higher rider costs resulting from increased order volumes. Selling and marketing expenses decreased to RMB781.9 million, compared with RMB1,136.7 million in the same quarter of 2023, reflecting a reduction in promotional activities on the JD NOW platform. General and administrative expenses also saw a decline, reaching RMB48.1 million, down from RMB56.4 million, primarily due to lower amortization of intangible assets related to the acquisition of JD NOW.
• Losses and Profitability: Dada Nexus reported a loss from operations of RMB310.5 million in the second quarter of 2024, compared to a loss of RMB197.0 million in the same period of 2023. On a non-GAAP basis, the company’s loss from operations was RMB164.5 million, a significant increase from RMB28.6 million in the prior year’s quarter. Net loss for the second quarter of 2024 was RMB286.2 million, compared to a net loss of RMB158.7 million in the second quarter of 2023. Non-GAAP net loss was RMB142.3 million, compared to a net income of RMB8.4 million in the corresponding quarter of the previous year.
• Earnings Per Share and Share Repurchase: The company reported a basic and diluted net loss per ordinary share of RMB0.27 for the second quarter of 2024, compared to RMB0.15 in the same quarter of 2023. On a non-GAAP basis, the basic and diluted net loss per share was RMB0.14, compared to a net income per share of RMB0.01 in the second quarter of 2023. In addition, as part of the US$40 million share repurchase program announced in March 2024, Dada Nexus repurchased approximately US$9.8 million of American Depositary Shares (ADSs) by June 30, 2024.
• Strategic Focus on Growth: Dada Nexus remains committed to optimizing customer experience and achieving high-quality growth. Despite the challenges in certain revenue segments, the company has seen strong performance in its core metrics, particularly with JD NOW’s user base and order volume through the JD App, and the impressive growth of Dada NOW. Moving forward, the company will continue to focus on creating long-term sustainable value for shareholders, consumers, merchants, delivery riders, and society as a whole, through its strategic initiatives and innovative offerings in the retail and delivery industries.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 33.38, downward trending, with an expectations of support if the current support levels of USD 1.00 hold. Additionally, the stock's current positioning is below both 50-Day SMA and 200-Day SMA, which can act as a short to medium term resistance levels.

As per the above-mentioned price action, momentum in the stock over the last month, current macroeconomic scenarios, recent business & financial updates, and technical indicators analysis, a ‘Speculative Buy’ rating has been given to Dada Nexus Ltd (NASDAQ: DADA) at the closing market price of USD 1.16 as of August 26, 2024. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is August 26, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.