Chinese e-commerce giant JD.com (NASDAQ:JD) is expected to report its third-quarter earnings during the last week of November.
Currently trading at $31.40, JD stock rose 12.3% in October and it’s up 50% so far in 2019. That’s a huge improvement over the company’s performance in 2018, when JD surpassed the $50 level — an all-time high — but ultimately lost nearly 48% of its value. However, its 2019 recovery has been effectively stalled for months, with JD stock unable to surpass the $32 level. Will those Q3 earnings re-ignite the recovery of JD.com stock?
Here are some of the big factors to consider when evaluating JD stock, starting with why 2018 turned into such a miserable year.
2018: JD.com Hits a Record High, Then Drops Like a Rock
At the start of 2018, JD stock was on a tear. Shareholders had seen their investment gain rapidly through much of 2017 before JD stumbled through the fall. But at the beginning of 2018, it took off again at a rapid clip.
After ending 2017 at $41.42, JD closed at a new all-time high of $50.50 on Jan. 26, 2018. But it was all downhill from there. By mid-November, JD had bottomed out below $20 and it ended 2018 at $21.71, little more than half of what it had been worth at the beginning of year. So what happened that was so catastrophic to JD stock?
A number of factors hurt JD. The trade war between the U.S. and China was simmering. Tariffs the U.S. imposed began to have an impact on the Chinese economy, and anything that hurts the economy negatively impacts consumer spending. That’s never good news for an e-commerce company like JD.
Also of concern to investors was a slowdown of JD’s revenue growth. In Q3, the company blamed lower demand for big-ticket items for a year-over-year revenue increase of just 25%, its slowest-ever rate of quarterly growth.
In September, JD.com founder and CEO Richard Liu was arrested in Minnesota after being accused of raping a university student. That only added to the declines of JD stock.
Will Economic Factors Derail JD?
That takes us to 2019. JD.com started strong, but since April it has been stuck in the $31 to $32 range, repeatedly slipping, then recovering, but unable to break out. The company has had some big wins — its record-setting sales during its June annversary celebration gave JD a boost in June. Two months later, the company’s Q2 results shattered expectations, with EPS of 33 cents compared to the expected 7 cents.
The macroeconomic factors that can impact the success of JD.com aren’t going away, though. The trade war continues to be an issue, despite recent signs that it might be cooling. But China’s economy continues to slow. Several weeks ago, it was reported that its quarterly growth had dropped again to just 6%, the lowest level in three decades.
What Do the Pros Think About JD Stock?
Should JD.com be in your portfolio, and if so is now the right time to buy it? Among the 41 investment analysts polled by CNN Business, the consensus is that JD is a “buy.” If the company’s Q3 earnings are in-line with its earlier guidance, expect JD stock to pop.
However, it’s possible that China’s poor economy could cause the company’s results to miss expectations. In that case, JD would take a hit, at least in the short-term. Even in a worst-case scenario, no one expects a repeat of 2018, and no one is suggesting that the owners of JD.com stock have to sell their shares.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
