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Investors Flock to JD Stock amid Hong Kong Listing Plans


Nov. 20 2020, Updated 3:40 p.m. ET

JD.com (NASDAQ:JD) has emerged as one of investors’ favorite Chinese tech stocks this year. JD focuses on the e-commerce business. The company is China’s second-largest e-commerce company by sales after Alibaba (NYSE:BABA).

Notably, JD.com has investment and commercial relationships with Google (NASDAQ:GOOGL) and Walmart (NYSE:WMT). Google made an investment of $550 million in JD.com in June 2018. The company took a minority stake in the business. The company also cut a deal to help JD.com grow its international business. JD stock has risen over 7.0% since the Google investment.

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Investors want a piece of JD stock

JD stock closed at $46.78 on May 8, which put its YTD (year-to-date) gains at 33%. In contrast, Alibaba stock has fallen more than 5% YTD. Baidu (NASDAQ:BIDU) stock has fallen 21% for the year. Besides JD.com, the other Chinese tech stock in hot demand right now is Pinduoduo, which has gained 44% YTD.

Like Amazon, JD.com benefits from the spike in online shopping amid COVID-19. China placed several cities on lockdown at the height of the coronavirus infections in the country. With the lockdowns in place and physical retail outlets closed, Chinese households started shopping online, which increased the demand for JD.com’s e-commerce service.

JD.com will likely report its first-quarter results on May 15. The internal forecast points to at least 10% year-over-year revenue growth. In the last quarterly report, JD.com’s revenue and profit numbers beat the consensus estimates. Therefore, investors looking to ride the coronavirus wave in China have turned to companies like JD.com. The stock has gained 14% since the company’s last quarterly report in March.

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Investors’ strong appetite for JD stock also comes as the company prepares for a secondary listing of its shares in Hong Kong, following in the footsteps of its larger rival Alibaba. Notably, Alibaba’s Hong Kong listing in November 2019 enabled it to raise $13 billion in additional cash. JD’s Hong Kong listing might come as early as next month. The listing could help the company raise as much as $3.0 billion.

JD.com sits on $9.0 billion cash reserve

To survive the pandemic, companies want to shore up their liquidity. Recently, companies like Apple, Walt Disney, and Netflix have tapped the debt market to raise additional cash. JD.com doesn’t seem to have a liquidity problem. The company wrapped up 2019 with $9.0 billion in cash. The Hong Kong listing promises to boost the company’s war chest.

At $46.78 per share currently, JD stock has pulled up more than 80% from its pandemic lows. At this point, the stock spots a 30% upside potential to its highest Wall Street target price of $60.


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