RLX Technology Inc (RLX) Stock Price on the Rise Despite Possible Increased Chinese Regulation

RLX Technology Inc (RLX) stock prices were up 1.98% as of market close on April 19th, 2021, coming to a close at USD$9.28. Subsequent pre-market fluctuations saw RLX stock climb another 4.09% to hit USD$9.66.

Better than Expected Earnings Per Share

At the end of March 2021, RLX reported 4Q earnings of USD$0.05 per share, an improvement on the consensus estimate of USD$0.04 per share. In the same period of the previous year, RLX had reported a loss per share.

Net Revenues Skyrocket

Q4 2020 saw net revenues of USD$248 million being reported, which is a 200% increase compared to the net revenues reported in the same quarter of the previous year. Compared to Q4 of the previous year, Q4 2020 saw total operating expenses increase by a significant margin.

Future Plans for RLX

RLX CEO Ms. Wang highlighted company plans to consolidate their market leadership with the continued investing in research to enhance RLX technology to facilitate product development. The company aims to bolster their distribution and retail network while boosting their supply chain and production capabilities. Furthermore, RLX is working to extend their global capabilities and footprint.

Anticipated Numbers for Q1 2021

With these strategies meant to facilitate long-term growth and the creation of shareholder value, RLX anticipates a strong Q1 2021, with projections of net revenues coming in at more than USD$350 million, while non-GAAP net income is expected to be in the ballpark of USD$90 million.

Changes in Chinese Regulatory Policy

These are promising developments in light of a recent announcement by the Chinese government that it was seeking to modify laws that would increase the regulation of e-cigarettes and other tobacco products. Following this news, RLX stock prices had plummeted by an astounding 46% on March 22nd, 2021.

Where does RLX Stand?

With the company raking in minimal profits with a massive market cap of USD$16.9 billion, it is safe to say that RLX is a relatively speculative stock. In an Initial Public Offering that raised USD$1.4 billion in January of 2021, RLX will need to allocate the capital generated to good use for them to start generating substantial profits.

Outlook of RLX

Current long-term investors are hoping that the earnings report and future plans as outlined by the CEO will be both promising and fruitful in the long run, with minimal negative impact from changes in government policies in regard to tobacco product regulations. The extent to which these policies will affect the long-term strategies being implemented by RLX will become clearer with time.