Chinese retailer JD.com (JD) has taken investors on a wild ride this year. Since hitting a high of more than $108 per share earlier this year, shares of this embattled e-commerce player have sunk to below $70 per share of late.
Indeed, there are many reasons for this.
In general, investors appear to be wary of Chinese tech stocks right now due to regulatory and geopolitical risk. The Chinese government has begun to assert its power over these tech monoliths in a big way. If this power struggle continues between the capitalistic power of the private sector and the authoritarian power of the government, more pain could be on the horizon.
That said, there are a few key reasons why investors may want to view this recent dip of 30% from the company’s all-time high as a buying opportunity. Let’s dive into what bulls are looking at with this e-commerce gem. (See JD.com stock charts on TipRanks)
Solid Earnings Provide Positive Outlook for JD Stock
Among the most important factors investors ought to consider with any investment are a given company’s financials. The numbers with any investment often matter the most. After all, this is the quantitative piece investors can rely on to back up their subjective arguments for owning said company.
Investors read that right – nearly half a billion people are regular users of JD’s platform. The company’s growing interest among Chinese e-commerce consumers is impressive. Accordingly, it’s no surprise to see investors tout JD as a real competitor to Chinese e-commerce juggernaut Alibaba (BABA).
In addition to these solid earnings, JD also homed in on the company’s efforts to build out its logistics and fulfilment division, given the additional revenue seen with the JD Logistics listing in Hong Kong.
Growth in China Not to Be Underestimated
One of the key reasons long-term investors have gravitated toward JD of late is the company’s hyper-growth status within a booming e-commerce sector in China. The Chinese economy has shown absolutely torrid growth of late, with industrial output up more than 35% year-over-year.
These kinds of numbers coming out of the pandemic may be sustainable over the near-term. Accordingly, as more consumers are set to open up their wallets in the months and quarters to come, JD is well-positioned as a company that is standing at the ready to help its patrons realize their consumer needs.
Risks to Chinese growth, particularly in the Chinese tech sector, have taken the geopolitical form of late. Indeed, increasing U.S.-China tensions and delisting concerns around JD stock continue to drag down Chinese tech stocks overall. As we’ve seen with the fine the Chinese Communist Party slapped on Alibaba, as well as the recent reining-in of Didi Chuxing (DIDI) following its IPO, the Chinese government has made it clear that no company stands outside of its regulatory grasp.
Indeed, these headwinds may provide a unique buying opportunity for investors. Instead of staying close to home and investing in monopolistic domestic technology players that can seemingly do no wrong, Americans can consider investing in JD. If these headwinds are proven to be overblown, and the government moves toward a laissez-faire style of governance, companies like JD could prove to be incredible deals at these levels today.
What Analysts Are Saying About JD Stock
According to TipRanks’ analyst rating consensus, JD stock comes in as a Strong Buy. Out of 15 analyst ratings, there are 14 Buy recommendations and 1 Hold recommendation.
As for price targets, the average JD.com price target is $101.33. Analyst price targets range from a low of $80.00 per share to a high of $115.00 per share.
JD.com is well-positioned to continue to grow rapidly and provide investors with outsized free cash flow over time. In the game of investing, this is what matters. Eventually, the numbers will begin to overshadow the risks that are currently priced into this stock.
When that will ultimately happen, is the key question for many investors. However, it’s hard to argue against the value this growth stock provides investors today. Accordingly, JD is a stock every growth investor should be watching right now.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.