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JD Stock Gains on Buyback News amid Coronavirus Fear


Mar. 18 2020, Updated 11:53 a.m. ET

JD.com (NASDAQ:JD) stock rose 8.83% on March 17 after the China-based retailer announced a new share buyback program. The stock rose and closed the trading day at $38.35 on Tuesday. The stock price gain came after an 11.3% decline on Monday due to the rising threat from the deadly coronavirus.

Currently, JD stock is trading at a 50.5% premium from the 52-week low level of $25.48. The stock is trading a discount of 15.4% from the 52-week high of $45.34. At Tuesday’s closing price, JD’s market value was about $55.9 billion.

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JD’s stock repurchase program

On Tuesday, JD’s board announced a new share repurchase program. Under the new buyback plan, the company can repurchase stock worth $2 billion over the next two years. The company’s share buyback program should please jittery investors and increase its earnings amid the coronavirus outbreak. Like JD.com, McDonald’s (NYSE:MCD) and Starbucks (NASDAQ:SBUX) have also spent cash on share buybacks and dividends amid the coronavirus threat.

In December 2018, JD.com announced a share buyback plan of $1 billion to boost its stock amid a slowdown in China due to the US-China trade war. At the time, the company’s CEO faced sexual assault charges.

Strong cash flows to fund the share repurchase

The company plans to finance the share repurchase from its existing cash balance. JD.com has a substantial cash pile. At the end of December 31, 2019, the company’s operating cash flows were $3.6 billion, while its free cash flow was $2.8 billion. In 2019, the free cash inflow was 19.5 billion renminbi compared to an outflow of 7.9 billion renminbi in 2018.

JD’s share buybacks would lower the share count and boost the company’s earnings. Notably, the company reported an adjusted EPS of $0.54 in the fourth quarter. The adjusted earnings were better than analysts’ estimates of $0.44 per share and also grew 5.9% YoY in the fourth quarter. JD also posted upbeat results in the third quarter.

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The company’s revenues of $170.7 billion beat Wall Street analysts’ estimates of $166.7 billion. JD’s revenues rose 26.6% YoY in the quarter. The company’s annual active customer accounts increased by 18.6% to 362 million in the fourth quarter. Meanwhile, the mobile monthly active users also rose by 41% in the fourth quarter.

JD’s outlook amid the coronavirus outbreak

JD.com has forecasted growth in sales in the first quarter despite the threat of the coronavirus outbreak. Earlier this month, the company expected first-quarter revenues to rise by at least 10% YoY. JD expects online shopping sales to grow due to coronavirus fear.

Analysts also expect JD’s revenues to grow at a higher rate in the next two years. They estimate revenue growth of 18% in 2020 and around 18.3% in 2021. For the first quarter, analysts expect the revenues to rise by 12.4% YoY.

For the first quarter, analysts predict JD’s earnings to decline by 60.2%. However, the growth rate will likely improve by 18.2% in 2020 and 53.6% in 2021 on a YoY basis.

Analysts’ recommendations for JD stock

Analysts also like JD stock amid the coronavirus fear. Among the 44 analysts covering the stock, 35 recommend a “buy”— up from 31 the previous month. Only nine analysts recommend a “hold”—down from 11 in the last month. None of the analysts recommend a “sell.” As of Tuesday, analysts have given a 12-month average target price of $47.94, which is at about a 32.4% premium to Tuesday’s closing price.


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