Uxin Ltd (NASDAQ:UXIN) has bounced back after 40% plunge in November. The slump came as investors backed away from Chinese stocks amidst soaring trade tensions between China and the U.S. Quarterly financial results failing to beat expectations all but exacerbated the sell-off.
Fast forward, the stock has bottomed and recouped a good chunk of the losses accrued in recent weeks. The recent surge comes on the company announcing a strategic partnership with Taobao, one of Alibaba’s shopping mall.
Uxin Financial Results
Investors applauded the protracted partnership given its potential impact when it comes to value generation. Renewed investor interest has helped strengthen Uxin sentiments in the market depicted by the 60% plus rally in recent trading sessions.
The stock is on course to recoup all the losses accrued in November as the upward momentum continues to gather pace. After the recent spike higher, the stock faces immediate resistance at the $7 a share level.
A breach of the critical resistance level would reaffirm the emerging uptrend setting the stage for the stock to climb back to this year’s highs. A closer look at the chart, it is also clear that Uxin faces immediate support at the $4.90 mark on any sell-offs. A breach of the support level would attract shot sellers who would push the stock back to this year’s lower lows.
Why is Uxin Skyrocketing
Taobao Partnership
A plan by Taobao and Uxin to establish new online used-car shopping mall is the latest development behind the stock’s recent upswing. The two are also to work together on new areas of integrated supply chain and used car loan facilitation as part of the deal.
Uxin CEO Kun Dai said, “By combining UNIX’s unique ability to support cross-regional used car transactions with Taboo’s massive e-commerce traffic and superior data capabilities, we are confident that we can take the used car purchasing experience to the next level.”
The deal could not have come at a better time as it is poised to help Uxin extend its leadership in the fast-growing online used-car market. The company already controls 40% market share in the online used car market, expected to grow even further.
The Taobao partnership helped put the brakes on a sell-off wave triggered by mixed Q3 financial results. Heading into the earnings report investors awaited good news to avert a further slide of the stock.
Uxin delivered strong quarter of top-line growth as it beat its own guidance. Revenue in the quarter was up 59% to $125 million. However, net income took a hit dropping to $86.3 million compared to $110 million reported a year earlier.
Transaction volume was up 19% in the quarter to 221,309 vehicles mostly made up of transactions on used car sales to consumers. A marketplace approach and nationwide service network enabled the company to make more than 290,000 cars available to consumers.
Buoyed by Q3 stellar performance, Uxin is projecting continued growth in Q4. The company expects revenue to come in between $146.9 million and $152.7 million representing 38% year over year growth at the midpoint. However, the estimate indicates potential revenue slow down given that the company delivered an 80% revenue growth last year.
Bottom Line
When it comes to operational efficiency, Uxin is doing extremely well. Revenue growth in the recent quarter attests to a phase of robust growth. The signing of a strategic partnership with Taobao is another development that affirms the company’s long-term prospects as it continues to strengthen market share.
The stock has mostly underperformed on the broader Chinese stock market coming under pressure amidst soaring trade tensions. The U.S and China coming to an agreement should board well with investors and would help shore up Uxin stock, which has come under pressure in recent weeks.