JD.com: The Cream Rises to the Top in the China Stimulus Boom
2024.10.07 11:10
- JD.com is the largest e-commerce company in China and is often called the Amazon.com of China, providing a massive online marketplace, logistics, technology, finance and healthcare services.
- JD.com reported record net profits in its second quarter of 2024.
- JD.com initiated a $5 billion stock buyback program from September 2024 to October 2027, days after Walmart sold its $3.6 billion JD stock.
The China stimulus measures have caused Chinese stocks to rocket higher in anticipation of a recovery to come. It’s indiscriminately caused any Chinese stock in the computer and technology sector and retail/wholesale sector to get a boost coupled with existing short interest have resulted in double and sometimes triple digits gains in a matter of weeks. While many of these moves are overblown and undeserved, JD.com (NASDAQ:) is one of the better fundamentally sound stocks that justifies a surge, as they say the cream rises to the top.
Is JD.com the Real Amazon.com of China?
Many China e-commerce stocks have been dubbed the Amazon.com (NASDAQ:) of China, including Alibaba (NYSE:) and JD.com. However, JD.com is the largest e-commerce company in China and closely resembles Amazon’s business model with all the many business segments it also operates. Here’s a breakdown:
- Online Commerce:com is best known for its immense online marketplace selling a wide variety of consumer products ranging from electronics, fashion apparel, groceries, houseware, kitchenware, home goods and furniture. Its products come with an authenticity guarantee and harsh punishment for counterfeit merchandise. The marketplace has over 600 million active uses.
- Logistics: JD has its own logistics division operating over 1,600 warehouses encompassing more than 32 million square meters of space with over 350,000 delivery personnel. The logistics division is not only the largest in China but also operates throughout the world. As large as China is, JD can deliver to 90% to 90% of China within one day, and some areas can receive delivery in under 10 minutes. Its automated warehouses can replace 400-500 workers with just 5 operators to process over 200,000 orders daily.
- Technology: Like Amazon, JD’s technology division offers cloud computing, desktop-as-a-service (DaaS) virtual desktops, IoT, big data and artificial intelligence (AI) services to businesses. JD has its large language model (LLM) ChatRhino, which it trains on its oceans of real-time data encompassing over 50 million industrial product SKUs and 10 million proprietary e-commerce SKUs and reduces humans computer interactions from 2,000 down to 50 to increase production efficiency a hundredfold.
- Healthcare: Like Amazon, JD also offers online prescriptions, Chinese medicines and telehealth services. Users can have medical checkups, virtual doctor visits with in-house doctors, manage chronic diseases and receive nutritional and mental counseling as well as have medicines delivered.
- Finance: Unlike Amazon, JD also offers a finance division that offers asset management, supply chain management, consumer credit, crowdfunding and payment solutions.
JD.com Initiated a $5 Billion Stock Buyback Program
On Aug. 27, 2024, JD.com announced a $5 billion stock repurchase program effective from September 2024 to August 2027. This is a new buyback program after its last one was completed. It also takes place after Walmart (NYSE:) sold all of its 144.5 million share stake in JD.com for $3.6 billion on Aug. 21, 2024, for just under $25 per share. JD.com posted record net profits in its second quarter of 2024.
JD Stock Triggers a Weekly Symmetrical Triangle Breakout
A symmetrical triangle pattern is comprised of a descending upper trendline resistance converging with an ascending trendline support. The breakout triggers when the stock surges through the upper trendline ahead of the apex point.
JD exploded on the China stimulus news as it triggered a weekly symmetrical triangle breakout through the $28.81 descending upper trendline resistance. In 2 weeks, the shares surged over 80%. The weekly anchored VWAP support is still rising at $29.16. JD surged through its consensus analyst and highest analyst price targets in just over 2 weeks. Its weekly relative strength index (RSI) is at the oversold 76-band. Fibonacci (Fib) pullback support levels are at $39.70, $35.69, $32.50 and $30.01.
JD.com’s average consensus price target is $36.93, and its highest analyst price target sits at $47.00. It has 10 analyst Buy ratings and 5 analysts’ Hold ratings. JD stock trades at 12.56X forward earnings.
Actionable Options Strategies: JD nearly doubled in 3 weeks, which should make investors weary of chasing as a sell-the-news effect could trigger once the China stimulus actions are taken. Bullish investors should be patient and consider buying JD only on pullbacks using cash-secured puts at the fib pullback support levels. They can also write covered calls to execute a wheel strategy for premium income.
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