Case Study: JD.com (JD) stock according to high performing analysts
Key Points
Performance
JD.com shares fell by 14.58% this week, pushing their year-to-date losses down to -29.72%. This compares poorly to the S&P 500 which is up by 0.98% on a year-to-date basis thus far and the Nasdaq Composite Index, which is up by 7.24% on the year.
Event & Impact
JD.com posted fourth quarter results this week, beating Wall Street estimates on both the top and bottom lines. During Q4, JD.com’s revenue totaled $42.8 billion, beating estimates by $190 million. JD’s Q4 non-GAAP earnings-per-share came in at $0.70, beating Wall Street’s consensus estimate by $0.20/share.
Noteworthy News:
JD.com beat Q4 estimates; however, the company provided full-year 2023 growth guidance which disappointed investors. The company’s sales growth trajectory has slowed from the 20% mark to the mid-single digits. But, management did initiate a shareholder dividend for 2023, which could appease investors looking for more shareholder returns.
Nobias Insights
53% of recent articles published by credible authors focused on JD.com shares offer a “Neutral” bias. There are zero credible Nobias analysts who track JD.com shares. However 6 out of the last 6 articles published by credible authors have expressed “Bullish” sentiment towards shares throughout its recent sell-off.
Bullish Take Cavenagh Research, a Nobias 5-star rated author, said, “While I acknowledge investors' disappointment that JD's short-term outlook may be more challenging than anticipated, I maintain a positive outlook on the e-commerce giant's long-term potential. And reflecting on a competitive business model, paired with a cheap valuation, I reiterate a "Buy" recommendation.”
Bearish Take Vidhi Choudhary, a Nobias 4-star rated author, said, “Consumer spending in the country has slowed after years of stringent restrictions meant to mitigate the coronavirus pandemic. While most of these restrictions lifted in December, that hasn’t yet translated to shoppers spending a lot more money. In turn, China reported just 3% economic growth in 2022 — one of the lowest numbers reported in decades.”
JD Mar 2023
JD.com (JD), one of the largest eCommerce companies from China, reported its fourth quarter earnings results this week, sparking a double digit sell-off. JD.com shares fell by 14.58% this week, pushing their year-to-date losses down to 29.79%. After this recent weakness, JD.com’s market capitalization sits at $63.3 billion, meaning that it’s still one of the largest publicly traded Chinese stocks in the world.
There are no credible Wall Street analysts that Nobias tracks who cover this stock; however, according to Yahoo Finance there are 38 analysts who have provided price targets for JD shares. Currently, the average price target for JD across Wall Street is $78.07, which implies upside potential of approximately 93%.
Although there are no Nobias credible analysts who track JD.com, there are credible authors who have recently published articles on the stock and its recent earnings report.
Bearish Nobias Credible Analysts Opinions:
Vidhi Choudhary, a Nobias 4-star rated author, covered JD.com’s latest earnings report in an article that she published at Modern Retail this week. Choudhary highlighted JD’s top-line results, stating, “JD.com’s revenue in the fourth quarter was $42.8 billion, a 7% year-over-year increase.” “In comparison,” she noted, “the Beijing-based company reported a 23% rise in revenue during last year’s fourth-quarter earnings.”
“The company’s slowing revenue growth is indicative of the challenging economic environment many Chinese companies are facing,” Choudhary said. Looking at the tough macro environment that JD continues to face, Choudhary wrote, “Consumer spending in the country has slowed after years of stringent restrictions meant to mitigate the coronavirus pandemic. While most of these restrictions were lifted in December, that hasn’t yet translated to shoppers spending a lot more money. In turn, China reported just 3% economic growth in 2022 — one of the lowest numbers reported in decades.”
Moving on, Choudhary highlighted the company’s new forward guidance, stating, “For the full year, JD.com’s revenue was $151.7 billion, a 9.9% increase compared to 2021. Meanwhile, the e-commerce giant swung to a profit of $400 million from a loss of $810 million at the end of the fourth quarter last year.”
“According to Neil Saunders, managing director for retail at consulting firm GlobalData, the fact that JD is still pumping out growth is very positive,” she added. Choudhary quoted Saunders, who said, “I also take quite a lot of comfort in some of the things that JD is doing with its marketplaces and with its sites. I think there’s a lot of innovation there, especially trying to grow third-party merchants, trying to grow the number of brands, bringing a lot more products, partner with Western companies and I think their partnership with Tiffany to sell more in China.”
It appears that JD.com’s guidance is what sparked this week’s sell-off.
Bullish Nobias Credible Analysts Opinions:
Cavenagh Research, a Nobias 5-star rated author, published a post-earnings report this week at Seeking Alpha which stated, “Although the Chinese e-commerce giant posted a solid/mixed performance in the December quarter, investors were arguably disappointed about somewhat softer than expected FY 2023 guidance.”
Like Choudhary, Cavenagh Research focused on JD.com’s top-line results, stating, “During the period from September to end of December, China's largest e-commerce platform generated sales of about $42.43 billion, as compared to approximately $42.2 billion expected by analysts (according to data collected by Bloomberg).”
The author continued, “In addition, although JD materialized a 7% year-over-year expansion versus the same period one year earlier, the company's growth slowed down sharply compared to a rolling 5-year CAGR of greater than 20%.”
Despite this top-line slowdown, Cavenagh Research was bullish on the company’s profit-related results. They wrote, “With regard to profitability, JD's operating income increased from about $0.76 billion in Q4 2021 to $1.14 billion in Q4 2022 - driven by a slight topline expansion as discussed, paired with a 90 basis point jump in the operating income margin.”
“On a similar note,” Cavenagh Research said, “JD's non-GAAP net income attributable to shareholders increased to $1.1 billion, doubling as compared to $500 million during the same period in the previous year, and beating consensus estimates by close to $150 million (according to data collected by Bloomberg).”
Cavenagh Research touched upon the macro issues that JD.com faces in China right now, but concluded that the stock’s long-term growth potential remained intact. They stated, “JD's Q4 2022 results were not too bad - certainly not bad enough to justify an 11% sell-off -- in my opinion.”
Summing up their report, Cavenagh Research said, “While I acknowledge investors' disappointment that JD's short-term outlook may be more challenging than anticipated, I maintain a positive outlook on the e-commerce giant's long-term potential.” And reflecting on a competitive business model, paired with a cheap valuation, I reiterate a "Buy" recommendation.”
With JD.com’s bottom-line growth in mind, it’s important to acknowledge that the company’s board of directors approved a shareholder dividend for the first time. This was announced during the company’s official Q4 report.
Sandy Xu, Chief Financial Officer of JD.com, said: "We achieved profitable growth and strong cash flow for the quarter and full-year. While we explore new growth opportunities, we will continue our focus on financial discipline and technology-driven operational efficiency to build a solid foundation for JD.com’s future high-quality growth. Reflecting our healthy profitability and balance sheet and commitment to shareholder value, we are also pleased to continue to return value to shareholders in the form of a cash dividend."
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Seeking Alpha reported that JD declared a $0.62/share dividend, which will be paid on May 4th, 2023 to shareholders of record on April 6th, 2023. Moving forward, with regard to future dividend payments, JD.com stated: “In addition, the company plans to adopt an annual dividend policy, under which the company may choose to declare and distribute a cash dividend each year, starting from 2023, at an amount determined in relation to the company’s financial performance in the previous fiscal year, among other factors.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 53% of recent articles published by credible authors on JD.com expressed opinions that the stock will rise in value, resulting in an overall “Neutral” bias rating.
However, 6 out of the last 6 articles published by credible authors on JD have expressed “Bullish” sentiment, signaling that the stock’s recent sell-off is presenting a compelling contrarian opportunity.
Disclosure: Nicholas Ward has no JD position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.