Shares of Chinese e-commerce giant JD.com (NASDAQ:JD) have remained in a tight channel for most of 2019. In fact, since March 2019, JD stock has been stuck in a range between $26-$32.50 a share. That’s all thanks to that pesky trade war that doesn’t seem to have an end date.
Granted, there is a phase one trade deal on the table.
“As part of that deal, China will address intellectual property concerns raised by the U.S. and buy $40 billion to $50 billion worth of U.S. agricultural products. In exchange, the U.S. agreed to hold off on a tariff hike set for this week,” reports CNBC.
However, trade war progress may have hit a snag.
For one, the agreement hasn’t been signed. Two, China will not confirm details of the agreement until the U.S. cancels all additional tariffs. Three, should both sides fail to see eye to eye, the trade war could accelerate, China’s economy could cool further and it could all impact JD stock’s growth. With trade war uncertainty and slowing growth in China (GDP only grew 6% in the last quarter), investors aren’t exactly knocking down the door to buy Chinese stocks.
While my near-term view is negative here, I do like the long-term growth story.
The Long-Term Growth Story Is Still Intact
In fact, investors may want to use this climate of fear to accumulate shares on the cheap.
As even Warren Buffett has said, “a climate of fear is your friend when investing; a euphoric world is your enemy.” And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”
Outside of the trade war bubble, JD has a powerful growth story.
In its most recent quarter, JD saw higher revenue and consumer growth, even with the trade war. Net revenue for the second quarter was up 23% year-over-year to 150.3 billion yuan, or $21.29 billion. Annual active customer accounts were up 3.5% to 321.3 million. Going forward, JD sees revenue rising 20%-24% to between 126 billion yuan and 130 billion yuan.
In addition, Goldman Sachs believes JD stock could benefit from the global shift to e-commerce calling it one of the “best investment opportunities” along with Amazon (NASDAQ:AMZN) and Alibaba (NYSE:BABA) with a price target of $46 a share.
Better, according to eMarketer, retail e-commerce sales in China are expected to increase from $1.5 trillion in 2018 to $2.9 trillion by 2021, and to $4.1 trillion by 2023.
In short, there is plenty of growth in store for JD. Unfortunately, investors seem to be ignoring these powerful catalysts, as the trade war keeps them at bay.
The Bottom Line on JD Stock
Improving trade relations between the U.S. and China would certainly pull JD investors off the sidelines. While there’s no telling when that’ll happen, I believe investors can take advantage of the excessive fear keeping investors at bay.
While I’m not a fan of JD near term, I do believe the long-term growth story is intact and strong. The company seems well positioned to capitalize on the global shift to e-commerce and the fact e-commerce sales are expected to explode to $4.1 trillion by 2023.
Perhaps it’s time to buy the “blood in the streets” here in this “climate of fear.”
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.