(C) Reuters. Has JD.com Stock Plunged Enough?
JD.com (NASDAQ:JD) stock has been feeling the pain of the vicious crash in Chinese equities. The stock had collapsed around 42% from peak to trough before bouncing back modestly to $76 and change, on the back of a solid quarterly earnings report. Despite negative pressure on all Chinese stocks, I am bullish on the name.
China’s Stock Market Crash and JD
There’s no question that many investors are undecided about whether or not they even want to invest in China, given the plethora of risks, both seen and unseen. Indeed, the uncertainties couldn’t be greater for any Chinese companies, including the rapidly-growing best-in-breed e-commerce companies like JD.com and Alibaba (NYSE:BABA), both of which have been on the receiving end of the current sell-off.
There’s nothing investors hate more than uncertainty. Arguably, uncertainties couldn’t be greater with Chinese ADRs, amid Beijing’s recent crackdown, with lingering jitters of their de-listment. While it’s impossible to tell whether top Chinese stocks like JD are deep-value plays or value traps, I do think that value-seekers who want to be able to sleep comfortably at night may have reason to check out battered plays like JD, while they’re on sale.
Despite the incredible fundamentals and JD.com stock’s ridiculously low valuation metrics, the extreme volatility and negative momentum have kept many on the sidelines. Some are waiting for the negative momentum to subside. Others are waiting for the bad news to slow or even turn around. Also, some have been scared out of the names for good, as a result of the latest crash.
If you can sleep well at night knowing that a name like JD. could plummet on a completely unforeseen contingent event, only then would I look to punch a ticket into the “cheap” e-commerce titan. (See JD.com stock charts on TipRanks)
Next-level Growth at Dirt-cheap Multiple
JD. stock offers incredible growth at a very reasonable multiple. There’s no denying the company’s dominance in China or its strong fundamentals, especially as we move closer to what could be a blowout Single’s Day, China’s version of Black Friday.
The big question on the minds of investors is whether Beijing will continue to apply the pressure.
Beijing has already scared off many U.S. investors, causing them to dump their ADRs over profound uncertainties. Will this recent selling storm end well for longer-term holders of ADRs? Should U.S.-China relations improve, the recent crash in Chinese equities could prove to be overblown, and names like JD.com could have a front-row seat to a big relief rally.
In the meantime, JD is poised to continue growing its top-line at a double-digit rate. Yet don’t count on the stock following in the footsteps of such quarters if JD falls directly into Beijing’s crosshairs.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, JD stock comes in as a Strong Buy. Out of 12 analyst ratings, there are 11 Buy recommendations and 1 Sell recommendation.
As for price targets, the average JD.com price target is $97.67, implying an upside of 32.3%. Analyst price targets range from a low of $62.00 per share to a high of $125.00 per share.
The Bottom Line on JD Stock
In many ways, JD.com looks like an early-stage Amazon (NASDAQ:AMZN). Given its recent courier robot rollout announcement, JD.com may be in a spot to outpace its American rival.
In short, JD.com could be a wonderful company. Until the slate of regulatory risks is reduced, though, it’s tough to tell just how good the risk/reward really is.
Disclosure: Joey Frenette owned shares of Amazon at the time of publication.
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Has JD.com Stock Plunged Enough?