Should You Buy JD Stock Like Cathie Wood or Wait?

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May. 10 2021, Published 12:28 p.m. ET

Cathie Wood’s ARK ETF announced last week that it has added more JD.com (JD) shares. Wood is known to back the companies she likes and generally has them in more than one of the eight ETFs that ARK manages. Should you buy JD stock like Wood or stay away from the Chinese company?

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Wood has a massive fan following, especially among retail traders who tend to follow her purchases. However, it's always advisable to do your research and weigh the investment in light of your risk-return trade-off.

JD Hong Kong stock

In 2020, JD went for a dual listing in Hong Kong a year after rival Alibaba went for a dual listing. Alibaba was also planning to ditch U.S. stock markets for the Ant Financial IPO, which was stalled by the Chinese government. Given the fears of tightening regulations in the U.S., which could lead to the delisting of Chinese companies, many prominent Chinese companies have looked at a dual listing.

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Cathie Wood and JD.com stock

Wood has JD.com stock in the most recent ARK Space ETF (ARKX) where the company is the second-largest holding. JD also forms part of the ARK Fintech Innovation ETF (ARKF) where it's the seventh-largest holding.

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JD.com versus Alibaba

While both JD and Alibaba are Chinese e-commerce companies, the latter’s stock has sagged amid the crackdown by Chinese regulators. Even though Alibaba agreed to billions of dollars of fines toward an anti-trust probe, the company’s woes in China look far from over.

jdcom inc jd stock valuation
Source: TIKR

JD versus BABA stock valuation

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JD stock valuation

Currently, JD stock trades at an NTM (next-12 month) PE multiple of 41.4x. The multiple has averaged 43.3x over the last year and 42.6x over the last five years. The stock looks somewhat undervalued compared to its historical trading multiples.

However, Alibaba stock’s NTM PE multiples are almost half of what JD trades at. Alibaba trades at an even larger discount to its historical trading multiples amid the crackdown by China.

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JD stock forecast

According to the estimates compiled by CNN Business, JD’s median target is $107.06, which is a premium of 48 percent. Its highest and lowest target prices are $146.35 and $90.09, respectively.

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Among the 45 analysts covering the stock, 43 rate it as a buy or some equivalent, while two rate it as a hold. JD’s analyst rating and target prices reflect bullishness in Wall Street towards the Chinese company.

JD stock on Reddit

JD isn't among the popular stocks on Reddit. A post on subreddit r/stocks with 2.6 million members talked about the catalysts that could take JD stock to $90. The post was upvoted 42 times and among other factors listed Wood increasing the stake in JD stock as a bullish driver.

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jd stock technical analysis
Source: TIKR

Death cross formation in JD stock

JD stock is a good buy.

JD stock looks like a good buy despite the geopolitical tensions between the U.S. and China. The stock gives good exposure to the fast-growing Chinese e-commerce market. Also, given Alibaba’s troubles with the Chinese regulators, it looks like a relatively safer bet.

What price to buy JD stock?

JD stock looks like a good buy near the $70 price level from a fundamental perspective. However, from a technical standpoint, the stock is trading below its 50-day and 200-day SMA (simple moving averages), which indicates short-term weakness. Also, short-term traders should tread with caution because there's a death cross formation with its 50-day SMA looking to fall below the 200-day SMA, which could lead to short-term weakness.

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