13 Aug

JD Shares Rise 10.0% Due to Stellar Q2 Results

WRITTEN BY Aditya Raghunath

JD.com (JD) shares have risen more than 10.0% in early market trading on Tuesday. The shares rose after the company announced its second-quarter results.

JD.com shares rose in early market trading

JD.com reported sales of $21.9 billion—a rise of 24.2% year-over-year. The company’s adjusted EPS rose 560% to $0.33 in the second quarter.

JD.com reported sales of $17.62 billion and an EPS of $0.05 in the second quarter of 2018. Analysts expected the company to post revenues of $20.89 billion and an EPS of $0.07 in the second quarter. JD.com beat the revenue estimates and crushed the earnings forecast, which drove the stock higher.

Currently, JD.com stock is trading at $29.43 per share, which is 53.0% above its 52-week low. The stock has gained 40.2% year-to-date. Last year, JD.com investors lost significant wealth. The stock fell 52.0% due to serious allegations of CEO misconduct, the US-China trade war, and a slowing domestic economy. While the trade war and slowing Chinese growth are still major concerns, JD.com will likely grow its revenues and the bottom line a strong pace.

JD.com leads the domestic retail market

JD.com is the market leader in China’s retail segment. The company had annual sales of $67 billion in 2018. The sales grew 37.0% annually between 2015 and 2018. The company benefited from China’s expanding middle class and rising Internet penetration.

JD.com’s press release said, “JD’s commitment to bringing users the best overall shopping experience continues to win over consumer mindshare. We will remain focused on leveraging technology and innovation to enhance our offerings, increase efficiency and drive shareholder value for the long term.”

Key highlights in the second quarter

For the quarter ending in June, JD.com successfully added premium international brands to its online platform. Leading Italian fashion house Prada announced a partnership with JD.com. Prada’s three major brands opened first-party stores on JD.com. There were 20 other luxury brands including Sandro & Maje, Mulberry, and Giuseppe Zanotti that partnered with JD.com in the second quarter.

JD.com collaborated with major brands and manufacturers. The company partnered with China’s TCL. The latter launched three smart appliances specifically targeting the domestic consumer market.

Due to the recent upward spiral in JD.com’s share price, the stock is trading at a forward PE ratio of 28.6x. The ratio indicates that the stock is still grossly undervalued. In 2019, the earnings will likely grow over 100%. JD.com is a key player in China’s e-commerce market. The company is a solid stock to bet on in the long term. There are multiple growth drivers. The company will increase the bottom line as it continues to scale.

Market Realist analyst Aditya Raghunath doesn’t hold a position in JD.com stock.

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