JD.com (NASDAQ:JD) has been on fire — bet you haven’t read something like that in a while — since its fourth-quarter lows. Even with the coronavirus from China in the mix, JD stock is still up more than 100% from its lows less than six months ago.
That kind of outperformance has garnered some attention, and rightfully so. This e-commerce stud isn’t the diversified and powerful size of Alibaba (NYSE:BABA). However, it’s clear that online sales continue to boom and that’s especially true for an economy like China.
China Is Huge
Let’s put it this way. The U.S. has the largest economy in the world, with nominal GDP of $21.44 trillion. It has a population of roughly 330 million people. China is the world’s second-largest economy with a nominal GDP of $14.1 billion. That’s almost three times the size of the third-largest economy, Japan, which had nominal GDP of $5.15 billion.
However, China has a population of almost 1.4 billion and while growth in this country has been under pressure, it’s still far and away stronger than other economies its size. Obviously the trade war was a negative for China’s economy, and now the coronavirus is having a negative impact on GDP. That goes for the world, too.
But the assumption is that, eventually, this too shall pass. And when it does, the world will get back to its normal life. That means growth for China, and in particular, growth for its booming middle class.
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Just as e-commerce is a growth engine for retail here in the U.S. — think Amazon (NASDAQ:AMZN) or Shopify (NASDAQ:SHOP) — those same trends are in place in China, too. For companies like Alibaba and JD.com, that simply equates to growth, which is exactly why these stocks are holding up amid this market-wide volatility.
The next two charts are compliments of Statista. The first chart shows gross merchandise volume (GMV) of online sales in China, with iResearch providing the data.
The second chart shows some of the most popular online stores in China according to ecommerceDB, with JD.com making an impressive showing.
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This doesn’t necessarily mean JD.com is the slam-dunk winner here. What it does mean is that the company has solid positioning in a secular growth theme in a country that is growing incredibly fast.
A Closer Look at JD Stock
When JD last reported earnings earlier this month, it beat top- and bottom-line estimates. Revenue grew 26.6% more than the year prior.
Analysts expect JD stock to earn $1.16 per share in profit this year and $1.78 per share in earnings next year. Admittedly, looking at this the full-year estimate for 2020 is hard enough in this climate, let alone estimates for fiscal 2021. However, e-commerce seems to be the one engine that’s still humming. That’s as consumers continue to spend without wanting to leave their home.
As a show of confidence, the board for JD.com recently approved a $2 billion share buyback. This comes at a time where Target (NYSE:TGT), AT&T (NYSE:T) and other high-quality companies are pausing their buybacks. That says something, doesn’t it?
If JD, Alibaba, Amazon continue to drive sales when times are turbulent, imagine how they’ll do when there’s more certainty.
Bottom Line on JD
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A glance at the chart highlights just how well JD stock has been holding up. The stock is just a few dollars off its 52-week high, as bulls continue to bid it higher. It’s one of the few stocks above the 50-day, 100-day and 200-day moving averages.
A move through $43 could be enough to send JD back to new highs. If the overall market begins to rollover though, a test of $36 and the 100-day may be in the cards.
Unless the selling really picks up pace, it’s hard to imagine JD stock will revisit the $32 to $33 area. If it does, long-term investors may consider scooping up some shares. That’s assuming the long-term secular growth in e-commerce isn’t going away anytime soon.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
