JD.com (JD) is a leading Chinese e-commerce platform that serves millions of customers through its website and applications each year. Its platforms let users shop online and then it uses its advanced delivery network to ship these orders.
JD.com targets a large pool of customers since China is a big country with over 1.4 billion people and its middle class is expanding rapidly.
However, JD operates in a highly competitive market that is dominated by a few large companies like Alibaba, Pinduoduo, Vipshop, and Suning.
Still, its business has done well over the years as its annual revenue has jumped from over $82 billion in 2019 to over $152 billion in the last financial year. This growth has been mostly organic since it has not made any big acquisitions.
JD.com is also different from other companies like Alibaba and PDD Holdings. For example, it is primarily an e-commerce company with operations mostly in China and Southeast Asia. PDD has expanded internationally with its Temu brand while Alibaba is in other industries like cloud computing and gaming.
JD.com stock was trading at $26.38 on Wednesday while its HypeIndex figure was up by 257%.
Positive hype
JD.com has generated positive hype after the company approved a new $5 billion share repurchase program this week. This is an important program because the company has a market cap of $39 billion, meaning that it will repurchase about 12.8% of its outstanding shares.
The share repurchase announcement came after the company reported relatively weak financial results that missed analysts’ estimates. Its revenue growth was just 1.2% to RMB 291 billion or $40.7 billion.
JD Retail’s revenue rose by 1% to RMB 257 billion while its JD Logistics rose by 8% to RMB 44.2 billion. The main laggard was its New Business segment whose revenue fell by 35%.
Nonetheless, its operating profit jumped from RMB 8.1 billion in Q2’23 to RMB 10.1 billion in the last quarter.
JD.com was not the only Chinese e-commerce company to publish weaker results than expected. PDD Holdings stock fell by over 15% after reporting revenue of $13.6 billion, lower than the expected $14 billion.
JD stock has dropped by over 73% from its highest point in 2020 even as its annual revenue has grown. As a result, there are signs that it has become a bargain since it has a forward P/E ratio of 8.5, lower the sector’s median of 17.12, and the S&P 500 index average of 21.
The stock is also much lower than the average analysts' estimate of $40.50. Most analysts, including JPMorgan, have a bullish view of the company.
It has a strong balance sheet with over $27.7 billion in cash and short-term investments and $7 billion in long-term debt.
Negative hype
The company’s growth has slowed as the Chinese economy goes through a balance sheet recession, where households are trimming their spending. Recent data shows that China’s retail sales have slipped in the past few months.
JD.com is facing substantial competition from companies like Alibaba and PDD Holdings, meaning that it will struggle to have the growth it had in the past.
JD could be exposed to China and US tensions, especially if Donald Trump wins the White House. Trump has threatened big tariffs on China’s imports. In the past, the US has considered delisting Chinese companies.
JD.com stock summary
JD.com shares have crashed by over 70% from their all-time high. This retreat coincided with that of Alibaba, which has also dropped in the past few years.
On the weekly chart, JD shares have remained below all moving averages, meaning that bears are in control. It seems to be forming a double-top pattern whose lower side is at $20.32 and whose neckline is at $35.51. Therefore, the stock will likely drop some more and then bounce back later this year.
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