The turbulent sell-off of SF Holding, China’s largest publicly traded parcel delivery company, has rattled investors, sending them a clear warning about earnings risks that have been building up in the most popular stocks . The Chinese courier , which operates SF Express in mainland China and Hong Kong, has had US$12 billion wiped off its market capitalisation in the past week after a company statement forecasting a quarterly loss caught traders off guard. The projected loss of as much as 1.1 billion yuan (US$168.4 million) for the three months ending March came as a surprise for the Shenzhen-based company, which was seen by investors as having a significant lead over rivals in the courier industry. The stock’s 20-plus per cent slump over the past six days is a brutal reminder to investors that the risk in the most popular bets stems from big earnings misses as well as lofty valuations, say analysts. “Earnings will be the key to how the market will play out throughout the earnings season in April and going forward,” said Song Yiwei, an analyst at Bohai Securities. “For the crowded-trade bets, the market had pretty high expectations for earnings. The pressure on earnings misses is building up and that will further weigh on these stocks.” Last year, local money managers were heaping funds into the stocks of industry leaders in anticipation that their leading positions would weather the pandemic. These crowded bets began unravelling at the start of the year, as massive relief packages and a quick roll-out of vaccines strengthened expectations of economic recovery and policy normalisation. SF attributed the predicted loss to increased investment in new business, intensified competition in the Lunar New Year period, rising labour costs and a high base the year before. Its net income increased 26 per cent to 7.32 billion yuan last year, as the outbreak of Covid-19 boosted demand for online shopping. In answer to queries at a shareholder meeting on April 9, billionaire chairman and founder Wang Wei said the company would return to profit in the second quarter, but the annual profit would be lower than last year. Analysts have been quick to respond, cutting SF’s average earnings forecast for this year by 18 per cent to 7.3 billion yuan based on Bloomberg data. That implies a 0.3 per cent profit decrease from 2020. “We are positive that SF’s utilisation will pick up in the second and third quarters,” said Yan Hai, an analyst at Shenwan Hongyuan Group in Shanghai. “But the whole-year profit will still be under pressure because of the heavy investments.” The analyst lowered the rating on SF to “outperform” from “buy” and predicts a 33 per cent drop in annual profit this year. SF is valued at 38.7 times realised earnings after shedding 46 per cent from its all-time high set on February 10. The stock dropped 1.4 per cent to 63.71 yuan in Shenzhen on Friday. The company is now capitalised at US$44.5 billion, 77 per cent bigger than US-listed ZTO Express that is ranked as China’s second-largest courier firm.