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Is JD Stock a Good Bet before Hong Kong Listing?


Nov. 20 2020, Updated 3:57 p.m. ET

JD.com (NASDAQ:JD) has emerged as one of investors’ favorite picks among Chinese technology stocks amid the coronavirus pandemic. At about $52 per share, JD stock has more than doubled from its pandemic lows of $25. Now, the stock spots more than a 45% gain for the year. The other favorite Chinese technology stocks picks are Pinduoduo (NASDAQ:PDD), up 60% for the year, and NetEase (NASDAQ:NTES), up 20% for the year.

JD is one of China’s leading e-commerce companies. The company also runs financial services, courier, and cloud computing divisions. Although the coronavirus impacted global business activity, JD delivered strong first-quarter results.

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The company reported revenue of $20.6 billion, which jumped 20.7% year-over-year and beat the consensus estimate at $19.3 billion. JD posted an adjusted EPS of 28 cents, which beat the consensus expectation of 9 cents. Notably, JD stock has risen more than 6.0% since the company reported its first-quarter results on May 15.

Investing in JD stock amid Hong Kong listing preparations

JD stock has soared in recent weeks due to strong first-quarter earnings results and hope stemming from the economic reopening in China and around the world. JD shares have risen 25% since China lifted the lockdown in Wuhan on April 8. Notably, the first coronavirus case was reported in Wuhan.

Despite JD stock’s big rise in recent weeks, it still has upside potential. Currently, JD has a 30% upside to its highest Wall Street target price at $67. Moreover, the Hong Kong secondary listing of shares and the $2.0 billion repurchase program could boost JD stock.

According to Bloomberg, JD has secured approval for a secondary listing of its shares on the Hong Kong Exchange. The company’s Hong Kong share sale should be on June 18. JD could raise as much as $3.0 billion.

The windfall will likely enhance JD’s liquidity amid the pandemic. Cash has become king for businesses trying to survive the pandemic, which is evident in the wave of fundraising. Apple has borrowed $8.5 billion to shore up its liquidity. Walt Disney and PayPal are the other companies that have tapped the debt market to boost their liquidity.

JD could use the Hong Kong listing windfall to increase its investment in growth areas, which could boost its earnings and lift the stock. Also, the company could use the listing proceeds to expand its repurchase program. JD’s stock repurchase program got a $2.0 billion boost in March.


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