In mid-August, JD.com (NYSE:JD) stock soared to all time highs after the Chinese e-commerce giant reported second-quarter numbers that were very, very strong.

But the numbers were supposed to be great because of the Covid-19 pandemic which forced Chinese shoppers to buy products online in Q2.

Still, the report showed that JD had positive catalysts beyond Covid-19.

And the results proved that JD is becoming, in-line with bulls’ longtime prediction, the Amazon (NASDAQ:AMZN) of China.

As a result, I think investors should stick with JD stock. The company has tons of momentum, its fundamentals are rock solid, and its valuation remains favorable.

JD Reported Strong Earnings

JD’s Q2 earnings report was strong.

Thanks partly to the Covid-19 pandemic, JD.com’s  top-line growth is accelerating meaningfully. Its customer count jumped 30% year-over-year in Q2, and its revenue soared 33.8% YOY; that was its fastest revenue growth since 2017, and its sales have climbed 28% in the first half of the year.

Importantly, its first-half revenue growth rate of 28% was materially higher than China’s overall online retail sales growth rate of 16%. Thus, JD’s share of the booming Chinese e-commerce market is increasing.

At the same time, JD’s profit margins are being boosted by its growth. The margins of its earnings before interest, taxes, depreciation and amortization, excluding certain items, rose about 0.5  percentage points YOY to 3.4%. Its adjusted EBITDA rose 55.8%. Its full-year EBITDA margins look poised to come in at record highs.

Overall, JD reported a really solid quarter, which included strong revenue and profit numbers.

Given the strong earnings, it should not be surprising that JD stock is rallying.

JD’s Fundamentals Are Improving

The fundamentals supporting JD stock are rock solid.

Chinese retailers generate more revenue than those of any other nation, as its consumers are expected to spend $5.1 trillion on retail products in 2020.

That huge retail market is rapidly digitizing, as e-commerce penetration in the country is expected to jump from 6% in 2012 to 25% in the first half of 2020.  Further, the top 20 retailers in China control only 18% of the market, versus the 48% share that the top 20 retailers in America have.

Consequently, over the next several years, China’s e-commerce market will continue to grow at an average annual pace of 10%-plus, while the market share of a few large companies will  jump.

JD.com will be one of those players.

China’s largest direct-to-consumer retailer with its own fully developed logistics network, JD looks a lot like the Amazon of the Asian country. And, as the Amazon of China, JD will use its size, growth strategies and enhanced transportation network to dominate China’s e-commerce market and sustain 15%-plus revenue growth.

On top of that, JD will, like Amazon, be able to increase its profit margins. That is, JD will leverage its large size to raise its profit margins towards the 5%-plus range.

Given all of these points, JD’s profits are poised to surge.

The Valuation of JD.com Stock Remains Reasonable

Some, but not all, of that profit growth is priced into JD stock today.

Based on 15%-plus revenue growth over the next several years and steady margin expansion to the 5%-plus range, my estimates indicate that JD is on track to generate about $5.50 in earnings per share by 2025.

Consumer discretionary stocks typically fetch a forward price-earnings ratio of 20 times. That forward multiple and 2025 EPS of $5.50 results in a 2024 price target for JD stock of $110.

Discounted back by 8.5% per year, that equates to a 2020 price target for JD of about $80.

Thus, at $75 today, JD isn’t overvalued.

The Bottom Line on JD Stock

Stick with JD. The company is firing on all cylinders right now and will continue to fire on all cylinders for the foreseeable future. At the same time, its valuation remains reasonable.

As long as that remains the case, JD stock will keep powering to new highs.