Why You Need to Think a Little Deeper with JD Stock

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Due to the carnage that the coronavirus pandemic has caused the global financial markets, you’d expect almost every name to be down in the gutter. However, notable publicly traded Chinese companies, such as JD.com (NASDAQ:JD), have demonstrated their resilience. While not up by a massive amount, that JD stock is in the black at all is a positive sign.

JD stock
Source: Michael Vi / Shutterstock.com

Furthermore, all eyes are on China but for a very different reason. At the onset of the outbreak-turned-pandemic, many governments viewed China with suspicion. To put it diplomatically, the government has been very coy with their data, even going so far as to refuse outside help. Later, when Covid-19 spread throughout the globe, it’s safe to say that not too many world leaders have the warm and fuzzies regarding the second-biggest economy.

However, with most if not all countries suffering from the virus, China is now the benchmark for what to expect. Fortunately, after months of lockdowns and quarantines, the Asian power is now getting back to work. On the surface, this tremendously helps the cause for JD stock.

Understandably, though, many challenges remain. For one thing, the government must be careful not to open to 100% capacity prematurely; otherwise, another outbreak could cripple the economy. Second and more critically, consumer behaviors have taken a hit. Obviously, this has negative implications for JD stock.

In particular, a Morgan Stanley survey discovered that while most people were willing to leave their home for work, most were reluctant to shop and socialize. A worrying 69% “said they would go out for essentials only.”

Is there still a bull case for JD stock? In my opinion, there very much is.

Consumer Sentiment Will Eventually Lift JD Stock

As with any retail-centric business, JD.com depends on a robust consumer economy. Obviously, the immediate news suggests that JD stock is a sell. With consumers everywhere hunkering down, now doesn’t appear to be the time to take risks in retail, online or otherwise.

Further, a New York Times article by Alexandra Stevenson detailed a worrying trend among Chinese buyers. For most millennials in this emerging superpower, they have grown up knowing nothing except booming growth. When their markets encountered periods of weaknesses, the consumer merely spent their way out of the speed bump.

But with the economically damaging U.S.-China trade war, along with risings costs and declining job prospects, many Chinese consumers did the unthinkable: rather than spending, they started saving. Not only did that hurt China-based businesses, it likewise harmed global retailers, which had grown fat on this market.

Now, with the coronavirus taking both commerce and lives, JD stock simply seems too dangerous to own. However, the bears are missing a key detail.

A major reason why consumer sentiment declined during the time this NYT article was published was that the trade war seemingly had no end. However, the pandemic – at least for China – has largely faded. Although it will take time for the country’s workers to fully recover, it will happen.

China consumer confidence index
Click to Enlarge
Source: Data from Statista.com

Further evidence comes from the phase one trade deal between the U.S. and China. In August of 2019, China’s consumer confidence index dipped to 122.4 points. By December, the index shot up to 126.6 points, or a 3.4% gain. In other words, as soon as a reasonable pathway toward economic cooperation and growth was apparent, consumers came roaring back.

I see the same thing happening with the country’s post-coronavirus environment.

Perhaps a Huge Wave Is Coming

Indeed, I anticipate a very large wave of sentiment over the horizon which will only see JD stock rise to astounding heights. As social creatures with daily routines, millions of Chinese professionals have been essentially imprisoned. With their savings that the NYT article mentioned, what do you think is going to happen?

More savings? I highly doubt it.

Look at what’s happening today with multiple states issuing shelter-in-place orders. According to a recent survey, nearly half of Americans feel the pandemic is damaging their mental health. No kidding. Being cooped up at home is fun for a while. But then you realize the value and dignity of work, of having a purpose within your community.

Frankly, as trivial as it may seem, earning a paycheck and spending it for discretionary reasons is part of what makes us holistically healthy. For one thing, it’s a reward for your efforts. Secondly, it’s part of a routine that you’ve established throughout your life.

For millions across China, they’re getting an early start to their recovery narrative. And people slowly but steadily piecing back their routines ultimately bodes well for JD stock.

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.


Article printed from InvestorPlace Media, https://investorplace.com/moneywire/2020/04/why-you-need-to-think-a-little-deeper-with-jd-stock/.

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