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JD Stock Rises Due to Upbeat Earnings, Higher Sales View

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JD.com (NASDAQ:JD) stock rose on Monday after the company reported upbeat fourth-quarter earnings results before the market bell. JD.com beat the revenue estimates and crushed the earnings forecast in the fourth quarter. The company expects double-digit revenue growth for the upcoming quarter, which drove the stock higher. In the previous quarter, the company beat its earnings and revenue estimates.

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JD stock rose

Shares of JD.com gained over 12% on Monday and hit its 52-week high. Notably, the stock reached its highest levels since June 2018 despite fears about the coronavirus outbreak, according to a Bloomberg report.

JD.com stock ended the trading day at $43.30. At Monday’s closing price, the stock has a market value of around $63.2 billion. The stock is 1.9% lower than the 52-week high of $44.11 and 69.9% higher than the 52-week low of $25.48. Also, JD stock has gained around 22.9% year-to-date.

JD’s Q4 earnings results

The company reported sales of 170.7 billion renminbi or $24.5 billion—a rise of 26.6% YoY (year-over-year). Analysts expected the e-commerce company to post revenues of 166.72 billion renminbi or $23.9 billion. JD also reported an adjusted EPS of $0.08 per share, which was $0.01 higher than analysts’ predictions. Meanwhile, the company’s earnings rose 14.3% YoY in the fourth quarter.

The company’s sales gained due to more active users. In the fourth quarter, the annual active customers rose around 18.6% to 362 million. The mobile monthly active users increased by 41% YoY in the fourth quarter. In a press release, CEO Richard Liu said, “We saw strong customer growth, especially in China’s lower-tier cities, driven by innovative marketing, superior product selection, and better customer service.”

The company also witnessed strong sales during November’s Singles’ Day shopping event, according to Bloomberg.

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CFO will retire

Along with the earnings release, the company announced that Sidney Huang will retire in September after serving as the CFO for 6.5 years. Sandy Xu, who is currently the CFO of JD.com’s retail operations, will replace Huang and will report to CEO Richard Liu. Meanwhile, after retirement, Huang will continue to serve as a senior consultant for the company.

First-quarter outlook

JD.com expects its sales to rise by at least 10% YoY in the first quarter of 2020. Last year, the company reported sales growth of 20.9% YoY to 121.1 billion renminbi or $18 billion. However, the company’s forecast might change due to uncertainties related to the Covid-19 virus. Analysts expect the company to report revenue of 136.8 billion renminbi—13% YoY growth in the first quarter.

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Coronavirus impacts JD.com and peers

Notably, the news about the coronavirus emerged in early January. Chinese retailers have cut their forecasts due to the outbreak. Last month, in the December-ending earnings transcript, Alibaba Group (NYSE:BABA) expected the coronavirus to hurt its revenue growth. The company is concerned that there might be disruptions in its supply and logistics businesses due to Covid-19. Baidu (NASDAQ:BIDU) also expects the coronavirus to dent its sales. On February 28, Baidu expected its first-quarter sales to decline by as much as 13% YoY, according to the earnings transcript.

In comparison, JD.com seems to be in a better position. The company has an in-house logistics model, according to an analyst at Blue Lotus Capital. The company also employs a direct-to-consumer sales business model.

Analysts’ recommendations for JD stock

Among the 42 analysts tracking JD stock, around 33 recommend a “buy,” while nine recommend a “hold.” None of the analysts recommend a “sell.” Analysts have an average target price of $45.6 on the stock, which implies a premium of 4.49% based on its closing price of $43.3 on Monday.

JD stock’s technical details

JD’s 14-day RSI (relative strength index) score is 62.53, which indicates that investors are neutral on the stock. However, the stock is nearing “overbought” territory. On Monday, the JD stock closed near its Bollinger Band upper range level of $43.39. The value indicates that the stock is in “overbought” territory.

JD stock closed 6.7%, 10.8%, and 21.8% above its 20, 50, and 100-day moving averages of $40.59, $39.07, and $35.56, respectively. Since the price is above the moving average, the stock’s trend is upwards.

Looking at the technical points, I think that the stock has upside potential despite concerns about the coronavirus, the US-China trade war, and the sluggish domestic economy.

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