The China e-commerce giant JD.Com Inc(ADR) (NASDAQ:JD) has been left in the dust despite the momentum gaining behind the country’s retail growth narrative. JD stock is actually down 17% over the past three months despite broad rallies across other China Internet stocks. So, now looks looks like the perfect time to buy.
We just got strong quarterly numbers from Alibaba Group Holding Ltd (NYSE:BABA), including an acceleration in growth in the company’s core e-commerce business. Those strong numbers corroborate the thesis that the China retail growth narrative is still gaining momentum.
With JD.com set to report earnings on Nov. 13, now looks like the time to get in on a beaten-up name before robust quarterly growth numbers set the stock back on track.
Three Big Reasons To Buy JD Stock
Why buy? Because of any or all of the following:
One, the China retail growth narrative is actually getting better.
Alibaba’s core commerce revenue rose 47% in the May 2017 quarter. That growth rate ticked up to 58% in the August 2017 quarter. A JD.com saw a similar uptick as revenue growth went from 41% in the May quarter to 44% in the August quarter.
Alibaba reported that core commerce revenue growth continued to accelerate in the November 2017 quarter (+63%). This implies that JD.com saw a similar acceleration in the quarter. Revenue growth will likely be north of 45%.
But analyst estimates are sitting at just 38% top-line growth. That is mostly because management delivered a weak guide last quarter, saying that revenues were going to grow somewhere between 36% and 40%. Clearly, the retail picture in China has improved since then. JD will likely smash those estimates.
Two, JD stock is not priced for a huge smashing of the numbers.
BABA stock failed to rise after its big earnings beat because a big beat was already priced into the stock. Alibaba shares had risen nearly 14% between the August and November prints . Clearly, good numbers were already priced in.
That isn’t the case with JD stock. The shares are actually down more than 16% since its last earnings. Clearly, everything but good numbers are already priced in. Therefore, good numbers should act as a nice upward catalyst for JD.com stock.
Three, JD’s business is about to accelerate thanks to some major help from some big partners.
JD.com just entered two huge partnerships ahead of Singles Day, Nov. 11, which is the world’s biggest day for online shopping and one where JD stands to make a lot of money. The first one is a data partnership with Tencent Holdings Ltd (OTCMKTS:TCEHY). JD.com will leverage Tencent-owned WeChat’s data from 963 million monthly users to more effectively put product in front of consumers.
The second one is a membership partnership with Wal-Mart Stores Inc (NYSE:WMT). The two companies will merge membership systems so that customers can receive the same discounts and benefits at both retailers. The partnership will also allow JD.com to fulfill customer orders using Wal-Mart inventories.
These two partnerships shouldn’t be taken lightly. Wal-Mart is a huge retailer with massive reach and lots of experience. Tencent owns arguably the most valuable database on China consumers.
And now both companies are rushing to the aid of JD.com.
Bottom Line on JD Stock
JD stock has been unfairly pummeled over the past several months. The sentiment was dour because it felt like Alibaba was running away with the China commerce market and there was nothing JD could do about it.
But it looks like that isn’t the case. JD is holding its own, and may even start to significantly grow market share behind the assistance of Wal-Mart and Tencent.
With blowout earnings due around the corner, I think now is the perfect time to buy into this misunderstood name.
As of this writing, Luke Lango was long JD and BABA.
