Chinese stocks have been slumping this month. This has led speculators to go bargain-hunting in the space. Given that the particular problems have been within the Chinese social media space, you’d think retailers would be faring better. However, JD.Com Inc(ADR): (NASDAQ:JD) hasn’t avoided the selling. In fact, JD stock is down from a high of 49 in August to 40 today.

The company’s Q2 results were solid. But they weren’t good enough, in the market’s perception, as compared to their chief rival. On the plus side, the company’s revenues continue to soar, and they’re turning those sales into cash flow at an accelerating clip. On the whole, do these factors support buying the dip in JD stock here now?

JD Stock Cons

Chinese Stocks In A Tailspin: It’s been a rough month for Chinese stocks. The Chinese government has been cracking down on controversial political speech ahead of next month’s all-important national congressional assembly. This has hit social media stocks sharply.

While JD stock obviously isn’t a social media play, selling in the big Chinese social internet stocks has spread across the whole tech sector. Additionally, US tech stocks, such as the FANG names, have been slumping. Chief rival Alibaba Group Holding Ltd (NYSE:BABA) has also declined more than 5% in recent days. Add it all up, and JD stock has been a sitting duck, taken down by broader selling pressure. Given the huge gains in these names year-to-date, the indiscriminate selling could continue for quite awhile.

Alibaba Had A Stronger Q2: If you believe in JD’s long-term story, the Q2 results were perfectly in line with the plan. The company’s free cash flow generation continues to explode. However, it isn’t prioritizing profits at the moment.

That opened the door for Alibaba to win public relations points with their quarterly results. Alibaba showed far stronger growth on the earnings per share line. It also showed more top-line growth than JD. That’s a worrying sign if it continues, though for now, it’s an aberration from recent pro-JD trends. One quarter doesn’t make a pattern, but Alibaba’s results for the previous quarter did sparkle more than JD’s.

JD’s Other Businesses Haven’t Kicked In Yet: One of the big appeals to Alibaba (and other diversified Chinese conglomerates) is that they have many profit centers. Alibaba, for example, has its huge cloud business. JD also has a cloud business, and just picked up a key Microsoft Corporation (NASDAQ:MSFT) cloud executive to run its business.

But so far, revenues from that division haven’t hit a critical mass. JD’s consumer finance division was spun off, since it was consuming too much cash. JD is investing in various ventures, including convenience stores, overseas operations in Thailand, a securities brokerage in China, and so on and so forth. However, JD hasn’t turned any of these side projects into major profit centers yet.

JD Stock Pros

Better Logistics: While it might not be fair, most US-based investors will constantly frame JD stock as a bet on whether or not the company is ahead of Alibaba. If you own JD stock, then, you have to believe that JD is winning the war. The good news? They are, in at least two key areas.

The first of these is in transportation. Amazon.com, Inc. (NASDAQ:AMZN) was famously successful in large part because the United States already had great transportation. Amazon’s model has struggled in other countries, such as Mexico, where ground delivery isn’t so cheap or predictable. JD’s founder realized this, and essentially built his own version of United Parcel Service, Inc. (NYSE:UPS). JD already has China’s most advanced system of warehouses and delivery vehicles. And they’re taking things up a notch, with industry-leading drone technology. Alibaba’s big deficit in delivery will be a thorn in that company’s side over time.

Better Products: The other key distinction between Alibaba and JD is the goods they sell. While Alibaba is often referred to as the “Amazon of China”, that’s not right. In fact, Alibaba is much closer to the eBay Inc (NASDAQ:EBAY) of China. Alibaba, in many ways, is closer to an online flea market than a high-quality top-end store. Talk to frequent Alibaba customers, and you’ll see that the low prices come with frequent disappointment.

JD, on the other hand, is much closer to Amazon. It buys products from reputable suppliers and sells direct to consumers. Critics doubted JD’s model, as in China, analysts thought that price was all that mattered. But JD’s visionary CEO Richard Lu has carved out a market appealing to the rising Chinese middle class that will pay a bit more for assured quality. As China’s economy continues to grow, JD’s guaranteed product quality will serve as an increasingly important feature.

Huge Growth: JD’s revenues are absolutely exploding. They’re up from $19 billion in 2014 to $28 billion in 2015 and $38 billion last year. With revenue growth accelerating to a 42% clip so far this year, JD should top $50 billion for full year 2017.

And they’re following the Amazon model perfectly. The company isn’t reporting much in the way of profits, but cash flow is turning sharply to the upside. The company burned a bit of cash in 2015. In 2016, this turned to positive $600 million. Over the past 12 months, it’s skyrocketed to more than $3 billion of cash flow generation. This is precisely what you want to see. JD’s operations are starting to throw off mountains of cash, which they’re rapidly reinvesting in various new international ventures, among other things.

Verdict

There are real concerns around JD.com stock. However, the market has fully priced these in with the 20% decline in shares lately. If you want to own the Amazon.com of China, forget about Alibaba. That over-hyped company isn’t it.

There’s no guarantee that JD will reach Amazon-levels of success either, but the odds of a home run investment are significantly higher. In the short-term, it wouldn’t be surprising to see the JD stock price top $50 following strong results over the next quarter.

At the time of this writing, the author owned JD stock. He had no positions in any of the other aforementioned securities. You can reach him on Twitter at @irbezek.