Tech stock under pressure: BEST Inc (NYSE: BEST)

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BEST Inc (NYSE: BEST) stock fell over 3.76% on 28th May, 2020 pre-market session (Source: Google finance) after the company posted lower than expected results for the first quarter of FY 20 as parcel and freight volume along with associated costs were negatively affected by prolonged work stoppages and travel restrictions. The cash and cash equivalents, restricted cash, and short-term investments were of total over RMB4.2 billion at the end of the quarter. The company has reported Non-GAAP Net Loss of RMB712.1 million (US$100.6 million), compared to non-GAAP Net Loss of RMB208.4 million in the same period of 2019.

Meanwhile, the company continues to optimize the logistics networks during the first quarter by further improving route planning and automation, integrating the comprehensive solutions to create revenue and cost synergies, and enhancing overall quality of service.  The company is exploring ways to sharpen the strategic focus, with one potential option being the spin-off of certain business units that are in early stages of development with the intent of moving the company to profitability while allowing those units to independently raise capital for future growth

Moreover, in mid-January, the COVID-19 outbreak had resulted in travel restrictions and quarantines in China that negatively impacted the Company’s operations and caused lower productivity from late January to late March. By the end of March, recovery of the Company’s services across China had been completed, including the reopening of all hubs, sortation centers and Cloud order fulfillment centers (OFC), as well as the resumption of all businesses. Parcel volume had fallen by 1.9% YoY compared to an overall market increase of 3.2%.  Freight volume declined by 15.3% YoY in the first quarter of 2020 driven by the extended work stoppages after the Chinese New Year holiday period, in addition to deceleration of manufacturing activities and disruption of supply chains that reduced demand for business-to-business freight services.

BEST in the first quarter of FY 20 has reported the adjusted loss per share of 26 cents, missing the analysts’ estimates for the adjusted loss per share of 21 cents, according to Zacks Investment Research . The company had reported 20.5 percent fall in the adjusted revenue to $771.9 million in the first quarter of FY 20, missing the analysts’ estimates for revenue of $901.6 million. The decrease was mainly due to disruptions in the business from the COVID-19 pandemic and the passing through of a temporary government waiver of highway toll fees to the customers through downward price adjustments. Adjusted EBITDA was negative RMB580.3 million (US$82.0 million), compared to negative RMB79.1 in the same period of 2019.

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