JD.com ( JD ), like all the other large internet companies in China, has been constrained in the past year due to heavy-handed regulations by government authorities.Now, having reported third-quarter earnings that beat expectations, is JD stock a buy?
X China stocks have been hammered this past year as Chinese regulators have issued a series of new rules aimed at banning unfair competition .The regulatory tightening started with a trickle late last year, but intensified in terms of its duration, intensity and scope.Moreover, China leaders continue to offer no sign of what’s to come.
It’s hit China stocks hard .This includes Alibaba ( BABA ) Tencent Holdings ( TCEHY ), Baidu ( BIDU ) and Vipshop ( VIPS ).
JD stock was also hit but has performed better than its peers.
JD also announced a management change on Sept.6.The company said that Chairman and Chief Executive Richard Liu “will devote more time to formulating the company’s long-term strategies, mentoring younger management, and contributing to the revitalization of rural areas,” JD said in a press release .
The company appointed Lei Xu as president.He’ll report to Liu, who’ll retain the title of chairman and CEO as well as about 80% of the voting rights of JD.com.
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x Thank You! You will now receive IBD Newsletters ALL DONE! Something Went Wrong! Please contact customer service CLOSE “In his new role, Mr.Lei Xu will be leading the day-to-day operation and collaborative development of various business units of JD.com,” the company said.Xu joined JD in 2009 and was CEO of JD Retail, responsible for the development, operation and strategy of JD.com’s retail business.JD stock jumped 4.2%, in reaction to the management shift.
JD Stock Jumps On Earnings Report On Nov.
18, JD reported better-than-expected third quarter results , crediting a “growing consumer mindshare” due in part to an expansion into supermarkets and other retail categories.JD stock jumped 6% on the report.
The company reported adjusted earnings of 49 cents a share on revenue of $33.9 billion.
Analysts expected JD to report earnings of 31 cents on revenue of $33.7 billion, according to FactSet Research.The company said it was able to outpace industry growth in the third quarter for several reasons.For example, JD has made a push into smaller cities.
“JD has built a unique business model, enabling us to have better control across the entire business process,” President Lei Xu said.
“This powerful competitive advantage allows us to navigate through economic cycles and increases our ability to create value as a new type of real-economy based enterprise.”
Partnerships With Walmart, Alphabet, Tencent JD’s business operations include strategic partnerships with Walmart ( WMT ), Google-owned Alphabet ( GOOGL ) and Tencent Holding.
Walmart established a relationship with JD.com in 2016 and owns a 9.8% stake in the company.JD’s collaboration with Walmart includes the establishment of a Sam’s Club flagship store and Walmart China flagship store on JD’s website.The two companies have leveraged each other’s supply chain to increase product selection for customers across China, and they’ve partnered on delivery services.
Alphabet invested $550 million in JD.com in 2018, focused on the creation of next-generation retail infrastructure services.
The partnership with Tencent has a number of moving parts.
JD has access to Tencent’s wildly popular messaging and mobile payment service called WeChat.The partnership drives mobile users to JD.com.Tencent owns nearly 20% of JD.com stock.
The two are also in a strategic partnership with Dalian Wanda Commercial Properties, a leading developer, owner and operator of commercial properties in China.
In addition, JD.com is focused on being a leading supply-chain-based technology and services provider.Altogether, JD has many similarities to Amazon .
It’s primary competitor is Alibaba .
Challenges Of Buying China Stocks Investors should be aware of the significant risks with investing in Chinese stocks.The authoritarian state and its regulators can impose sweeping restrictions, fines or bans on major companies.They often do so with little notice or transparency.
The wave of antitrust and regulatory actions by China now underway initially emerged in November.That was when China halted the planned initial public offering of Ant Group , a financial technology giant spun off from Alibaba.Many China stocks have seen their valuations cut in half.
“Markets hate uncertainty, and the implementation of these internet regulations has created a surplus of that,” said Brendan Ahearn, chief investment officer at KraneShares, a China-focused provider of exchange traded funds.”Many institutional investors are staying on the sidelines until there is clarity on the regulatory end game.”
JD Stock Ratings The IBD Stock Checkup Tool shows that JD stock has a healthy IBD Composite Rating of 81 out of 99.When choosing stocks for the biggest potential gains based on the CAN SLIM investment paradigm , focus on those with a Composite Rating of 90 or higher
The stock also has a Relative Strength Rating of 77.
The rating means that JD stock has outperformed just 77% of all stocks in the IBD database over the past 12 months.Ideally, look for stocks with a rating of 80 or higher.
The stock’s relative strength line has been moving sideways.The relative strength line compares the stock’s price performance with that of the S&P 500.An upward-sloping RS line means the stock is outperforming the S&P 500.A downward-sloping line means the stock is lagging the S&P 500.
Is JD Stock A Buy? JD stock is not a buy, but it’s trending in the right direction, holding its ground while other China stocks have not done as well.On a weekly chart, JD stock has formed a cup, but without a handle .
If you’re interested in buying large-cap stocks , in these articles you’ll find technical analysis of leading large caps to see if they are in or near a proper buy zone .
You’ll also find alerts to warning signs and sell signals that show when to take your profits or cut short any losses .
And, you’ll also discover if the current stock market trend is conducive to buying stocks, or if it’s an environment where you want to take defensive action and sell.
Also, check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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