I try to find ideas that will appeal to traders on all time frames. And the one I’m excited about right now is JD.com (NASDAQ:JD) stock. As an earnings play or as a stock to sit on for years, JD presents a favorable risk-reward scenario. I also believe it’s a rare opportunity.
Prior to the market’s opening bell on Nov. 15 is when JD.com will reveal its third-quarter earnings results. Short-term traders can buy JD.com stock shares in anticipation of an earnings beat. However, long-term investors also have a solid reason to pick up some shares. That’s especially true if they’re bullish on 5G technology.
JD Stock Isn’t for Value Investors
Usually, I prefer to recommend assets that are underpriced and underappreciated. But JD stock doesn’t fall into that category (in my humble opinion). A trailing 12-month price-earnings ratio of 214.22 most likely won’t impress Benjamin Graham-style investors. Thus, don’t expect JD.com stock to be a “value” in the traditional sense of the word.
That’s how it goes in the e-commerce sector: old-school valuation metrics simply don’t apply here. If they did, then buying Amazon (NASDAQ:AMZN) stock five years ago wouldn’t have made sense. As we all know in hindsight, though, traders who held on to those AMZN shares earned excellent returns.
As for the upcoming earnings event, you might have noticed that the vast majority of large capitalization companies have had earnings beats in the third quarter. Whether that’s because these companies are actually so profitable, or whether it’s just because analysts have been relentlessly revising their estimates lower, either way, it’s likely that the JD stock price will climb after the next earnings release.
JD.com Makes a Move into 5G
While both the U.S. and China have seized upon the opportunity to develop leading-edge 5G technology, both Chinese firms and that nation’s government have made a particularly forceful push towards the forefront of 5G. In a technology briefing authored by Christopher Eldred, Martin Kenney, Kenji Kushida, Jonathan Murray, and John Zysman, under the auspices of the University of California, Berkeley, China’s aggressive move into 5G technology is observed but with a note of caution:
Chinese companies have raced to the top of certain key 5G technology markets, and the Chinese government has publicized an aggressive 5G deployment timeline. It is possible that China could leverage these advantages into leadership in the next generation of information and communications technologies (ICT), up the stack from chips and devices to applications and platforms. At the same time, China’s dominance of 5G is far from assured, and there is no guarantee that 5G leadership will translate into dominance of the coming era of digital technology.
JD.com has recently demonstrated its willingness to participate in China’s 5G push with its launch of a logistics park. Located in Beijing, it’s powered on the 5G network. Through this technology, the company will be able to track equipment (pallets, forklifts, etc.) through super-fast real-time monitoring. Further, the system will provide instant preemptive alerts if problems occur.
JD Logistics proudly painted a picture of a futuristic parking-lot utopia:
The 5G system will also greatly improve the efficiency of operations within the facility through smart parking that guides incoming vehicles to the most appropriate parking space or docking bay, and digital docking bay that can [facilitate] real-time monitoring the truck loading and uploading goods.
I’m going to stick my neck out and make a prediction that 5G-powered smart parking will be standard in a few years, and I find it encouraging that JD.com is making an early move into this forward-looking technology. I don’t mean to editorialize too much. But hopefully, U.S. firms will soon match China’s commitment to the potential of 5G tech advancements.
The Takeaway for JD.com Stock
This discussion, however, isn’t about the U.S. versus China; it’s about JD stock’s prospects of future gains. You can buy it for an expected earnings beat or you can hold it for the 5G initiative. Or you can just do both. No matter what your time frame is, you’ll probably fare well with JD stock.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
