Excluding recent trade war-related volatility, China internet stocks have, by and large, done very well — thanks to robust tailwinds from an explosion in China consumerism. But, this big rally seems to have skipped over one huge China internet company: JD.com (NASDAQ:JD).

JD stock is down 14% year-to-date. It is also down 17% over the past year. Meanwhile, other China internet giants like Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), and Weibo (NASDAQ:WB) are up anywhere from 20% to 35% over the past year.

How is this possible? After all, JD is the second largest e-commerce company in China, right behind Alibaba. Thus, if Alibaba stock goes higher, JD stock should head higher too, right?

One would think. But, profitability concerns have weighed on investor enthusiasm at JD. Quite simply, JD has been unable to improve its profitability profile in a way that satisfies investors. Thus, selling pressure has dominated buying pressure, and JD stock has fallen.

But, I think this is a short-term phenomenon. Margins are compressing, thanks to growth-related investments. In the long-run, these growth-related investments will not only fuel continued robust top-line growth, but they will also disappear as the business goes from expansion stage to maturation stage. Thus, near-term investments actually improve the long-term revenue and margin profile at JD.

This dynamic of big near-term investment leading to big long-term growth is presently being dramatically underappreciated by the market. As such, I reasonably think that JD stock can break above $50 by the end of the year as investor sentiment normalizes.

Here’s a deeper look.

Big Investments Lead to Big Growth

I understand why JD stock has crumbled to $35, versus a 200-day moving average of $40.

Right now, all investors are seeing is a company with big– but slowing — revenue growth. Margins, which have been on a steady path of consistent gains for several years, are starting to flatten out. Analyst estimates are coming down. And trade war concerns have recently stung this already troubled stock.

But, that dour outlook on JD stock lacks scope. Specifically, it focuses on how revenues and margins are trending now, without understanding where they will be going tomorrow.

The main reason JD is suffering from mitigated profit growth is because the company is investing big in order to expand its business. Namely, JD is aggressively expanding internationally, including a huge expansion into Europe. Clearly, the company isn’t satisfied with dominating the China e-commerce market — it wants a piece of the global e-commerce pie, too.

That is a very smart move. Not only does it expand JD’s addressable market, but it also lengthens the growth runway. Eventually, the China e-commerce market won’t be a hyper-growth market anymore. At that time, JD will be able to pull international levers to keep growth strong.

Beyond expanding its commerce business, JD is jumping head-first into logistics, artificial intelligence and the cloud. Each of these markets has huge multi-year growth potential. And JD has the scale, resources, infrastructure, and reach to make big splashes in each.

Thus, today’s big investments need to be taken in context with the big picture growth narrative. These big investments are ephemeral, and will inevitably lead to super-charged revenue and profit growth.

JD Stock Could Soar to Above $50

Investor sentiment on JD stock has been awful recently. There really isn’t any other way to put it. And, until the company gets some good news, sentiment will remain dour and keep JD stock depressed.

That being said, JD stock is materially undervalued here and now. Thus, regardless of how investor sentiment shifts in the near-term, the long-term outlook on this stock looks very promising.

This is a company which grew revenues by 40% last year. Over the next several years, that growth rate should moderate due to scale and tougher laps. But, it should also remain big because the company is strengthening and lengthening its growth narrative through improved logistics, a deep dive into AI, and global retail expansion.

Thus, I reasonably think JD can grow revenues around 25% per year over the next five years. During that stretch, I also expect net profit margins to roar higher as investments peel back and robust revenue growth drives big opex leverage. That is why I reasonably see net profit margins heading towards Amazon.com (NASDAQ:AMZN) levels of around 3-4%, versus 1.5% guided for this year.

In that scenario of 25% revenue growth and 3-4% net profit margins, I think JD can do about $3.80 in earnings per share in five years. A growth-average 20X forward earnings multiple on that implies a four-year forward price target of $76. Discounted back by 10% per year, that equates to a year-end price target for JD stock of well over $50.

Bottom Line on JD Stock

There’s no doubt it: This stock has been a loser in 2018 and for the past year.

But, that could change as JD’s big investments start to pay off in the form of global retail sales growth, cloud growth, and operational efficiency improvements.

Long-term, thanks to the company’s broad exposure to multiple secular growth markets and the presently discounted valuation, JD stock has multi-bagger potential from its current levels. Patience will be rewarded in the long-term.

As of this writing, Luke Lango was long JD, BABA, BIDU, WB, and AMZN.