The first time I weighed in on the JD.com (NYSE:JD) I said, “investors can take advantage of the excessive fear keeping investors at bay” and “perhaps it’s time to buy the blood in the streets.” That was on Oct. 22, as JD stock traded at $31 a share.
At the moment, JD is up to $39.80 after pulling back on the coronavirus scare.
Even now, I argue that it’s time to buy the blood in the streets with JD. The company has once again caught strong support at its 50-day moving average, and there are plenty of near-term catalysts that could send the stock to $50, near-term.
Two Top Reasons Not to Worry about JD
Granted, there have been some recent issues.
One, China’s consumer economy slowed in recent years, thanks to the trade war.
However, as our own Luke Lango writes:
“Those trade tensions are finally de-escalating, and should continue to meaningfully de-escalate into 2020 as neither side wants to up the trade war ante. Easing trade tensions in 2020 will breathe life back into China’s consumer economy, as well increased fiscal stimulus from the People’s Bank of china, and resurgent consumer spending will create a rising tide for all Chinese consumer stocks.”
Two, the economy will take a hit in the first few quarters on the coronavirus story. However, it appears that much of that fear has been priced in, creating “blood in the streets” opportunities. In addition, coronavirus won’t hit e-commerce too hard, since shopping online doesn’t put too many folks at risk of the virus.
In fact, Bernstein analyst Robin Zhu called companies like JD “shelters in the storm, as people stuck at home flock to play games and shop – cementing online habits,” reports Barron’s contributor Reshma Kapadia. Also on that list are companies like Alibaba (NYSE:BABA).
JD Stock Is Still Fundamentally Strong
In its most recent quarter, JD saw surging sales that crushed estimates. For the third quarter, revenue grew 28.7% to 134.8 billion yuan ($19.2 billion), which beat company guidance. All thanks to strong growth in China’s “fast-growing lower-tier cities,” as highlighted by CEO Richard Liu. JD’s revenue forecast of between 163 billion yuan and 168 billion yuan also came in above expectations.
Better, “Analysts have remained optimistic that China’s e-commerce sector will continue to grow, led by the spending power of the country’s 400-million strong middle class,” notes Barron’s contributor Callum Keown.
The Bottom Line on JD Stock
With the trade war cooling off, and the coronavirus sending more folks online, JD has become one of my top blood in the street opportunities. Plus, with eCommerce still explosive, I wouldn’t be shocked to see shares of JD at $50 by year-end. After all, it’s tough to argue against the strength this stock has been exhibiting.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.