JD.com stock forecast: will the price rebound be sustained?
10:09, 22 September 2021
JD.com’s shares (JD) have plunged over 40% from February’s peak of nearly $107 to around $62 in August, mirroring other Chinese tech companies as investor appetite turned sour amid Beijing’s recent clampdown.
Over the past month, the price has rebounded 19% and is currently (21 September) trading at around $74. Will the recent uptrend be sustained?
In this article, we take a look at the company’s fundamentals, recent news and analysts’ JD.com stock price forecasts.
JD.com outlook: what makes it differ from Alibababa?
In terms of e-commerce volume in China, JD.com comes second after Alibaba (BABA), though the companies have marked differences.
While Alibaba is more of a marketplace that allows sellers and buyers to trade for a commission, JD.com more closely resembles an online retail store, with some major brands such as BVLGARI and Victoria’s Secret.
Another key difference is JD.com’s supply chain of warehouses, fulfilment centres and logistics primarily operate in-house. This enables the company to keep an eye on quality control, inventory management, as well as speedy delivery to its customers.
The downside of such a strategy is the relatively lower margin enjoyed by JD.com compared with some of its marketplace-driven competitors.
Although both stocks can’t boast significant gains so far this year, JD.com stock has recently broken through negative territory, while Alibaba is still 44% down, according to their one-year performance chart.
JD.com news: revenue breakdown
In the quarter ending June 2021, over 90% of JD.com’s revenue came from its core retail business, up 22.7% year-on-year to CNY232.56bn ($36bn).
Its logistics arm grew 45.7% year-on-year to CNY26bn, while the new business segment – which includes lower-priced products – jumped 60% to nearly CNY7bn.
But the latter two divisions were still loss-making, with JD Retail being the only unit offsetting losses.
In total, JD.com reported net revenues of CNY253.8bn in the second quarter, up 26.2% year-on-year, above market consensus.
Bigger marketing spend nets record customers
To help lift sales, JD.com increased marketing expenditure by 56% year-on-year for the second quarter.
The campaign managed to add 32m new users, a quarterly record, bringing total users to over 530m.
JD.com’s gross merchandise value rose by 27.7% year-on-year for the quarter ending June, supported by a massive marketing campaign during its annual ‘618 Grand Promotions’ (18 days of sales promotions in June).
Still, in the earnings call last month, the management warned that the current quarter brings a different set of challenges amid a resurgence of COVID-19 infections and floods in some parts of China.
Retail slowdown in third quarter
In August 2021, China’s total retail sales rose 2.5%, the slowest increase in 12 months and the fifth straight month of deceleration. The data was well below market expectations for a 7% gain and compared with 8.5% increase in July.
Source: https://tradingeconomics.com/china/retail-sales-annualJD stock analysis: regulatory risk
During an analyst call last month, JD.com’s management was asked whether government crackdown on internet companies will affect the company.
Alibaba, for instance, was fined $2.8bn on antitrust grounds earlier this year and more recently announced it will grant around $15.5bn for China’s so-called ‘Common Prosperity’ – the rapidly popular term used by Beijing to redistribute wealth to the wider public.
Chelsea Tam, senior equity analyst at Morningstar, said that JD received positive feedback from regulations related to data security and Beijing’s clampdown is unlikely to have a major impact on the company’s business.
Since the earnings call in August, JD.com has promoted Xu as president of the e-commerce company, with founder Richard Liu Qiangdong taking a back seat in day-to-day operations, mirroring moves by ByteDance's founder Zhang Yiming and Alibaba’s Jack Ma.
JD stock price prediction: upbeat outlook
JD.com did not provide earnings guidance, though analysts expect the company to continue posting robust growth.
Nomura analysts Jialong Shi and Thomas Shen, who spoke with the e-commerce company early this month, maintained their ‘buy’ call on JD.com’s shares, citing robust revenue growth.
“By category, management indicated that its general merchandise revenue will outpace that of its electronics category in 2H [second half of the year].”
Chinese holidays might help too.
Scaling up business in lower tier cities
Nearly 80% of JD.com’s new users in the second quarter lived outside China’s top ranked cities, CFO Sandy Xu said in August’s earnings call, marking the company’s continuous “win over price-sensitive users with our broad selection of value-for-money products and diverse services”.
In 2019, JD.com launched Jingxi service to cater for customers in third to sixth tier cities in China (Chinese ranking of cities, according to GDP, administrative level and population) to fend off competition from rapidly growing Pinduoduo. JD also enables group buying for customers in lower-tier cities, attracting more customers with reduced acquisition cost per customer.
“Also, JD will continue to invest in fulfilment facilities (warehouses, sorting facilities) in lower-tier markets to expand the coverage of its CGG business and boost order density in its key regions to improve unit economics.”
JD stock forecast: to $100 and up?
Nomura maintained its ‘buy’ JD stock projection and a target price of $88. Downside risks to these projections were cited as any further deterioration in China’s economy and if margin improvements from JD Retail or JD Logistics are less than expected.
Morningstar’s Tam, meanwhile, estimated the fair value of JD.com stock at $106.
Note that analysts’ predictions can be wrong. Many elements can affect an asset’s price, including the company’s financial performance in the coming years, economics and the regulatory environment in China. We encourage traders to perform your own due diligence before making any investment decision.
According to an optimistic JD share price forecast from MarketWatch of 21 September 2021, based on the opinions of 47 analysts who share their price targets, JD stock could hit almost $617 in one year. Meanwhile, 36 of those analysts recommend buy and none have a sell call.
MarketBeat shared a much more conservative JD stock forecast, showing that 13 of 16 analysts have a buy call on JD.com and expect the stock price to reach a tad above $100 over the next 12 months.
Algorithm-based forecast service Gov Capital estimated JD’s price to rise to nearly $135 in the coming year, representing a 74% increase potential.
Wallet Investor, another machine-based forecaster, tipped the stock price to hover above $80 by year end, before crossing $108 at the end of 2022. According to its JD stock forecast 2021-2025, the stock price could hit $194 by the end of 2025.
Keep in mind that the price can always go against you, so make sure you do your research thoroughly.
Edited by Alexandra Pankratyeva
FAQ:
Is JD.com a good investment?
Thirteen out of 16 analysts rate JD stock at buy, while only one has a sell call, according to MarketBeat, as of 21 September 2021. You should always conduct your own research before making any trading decision, and keep in mind that past performance does not guarantee future returns.
Will JD shares go up?
The consensus price target from 16 analysts surveyed by MarketBeat averaged $100 for the next 12 months. Analysts’ predictions can be wrong. The JD.com price can go against your position. We encourage you to do your own due diligence before making any trading decision.
How much can JD shares worth in 2025?
According to algorithm-based forecaster Wallet Investor, as of 21 September 2021, JD stocks might be valued close to $194 by the end of 2025.
Is JD a good stock to buy now?
Within four weeks since 19 August, shares of JD.com gained 19%, but the current price represents around a 30% drop compared with February’s peak of $107. Keep in mind that nobody knows exactly how the stock will perform. You should always conduct your own research before making any trading decision.
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