Bull of the Day: JD.com (JD)
JD.com JD, often referred to simply as JD, is a Chinese e-commerce giant headquartered in Beijing. Founded in 1998, it's a major competitor to Alibaba BABA in the Chinese online retail market. JD focuses on selling authentic products directly to consumers, with a strong emphasis on logistics and building trust with customers. It has also expanded into other sectors like cloud computing and artificial intelligence.
The reality of investing in Chinese equities is that there are additional risks and considerable uncertainties. However, JD appears to be one of the most appealing stocks in the market, with upward trending earnings revisions, a compelling technical setup, and a deeply discounted valuation.
For investors willing to take the additional risks of investing in a Chinese ADR, JD.com may offer an exceptionally asymmetric opportunity.
Earnings Revisions Pop
In the chart below, which shows the earnings revisions trend, we can see the earnings estimates have just begun to curl up for FY24 and FY25.
Analysts just started raising earnings estimates in the last 30 days, but because of the geographical disconnect, and generally bearish sentiment in Chinese stocks, the upgrades are likely going mostly unnoticed.
This means investors considering JD.com stock are fishing in a spot with very few fellow anglers.
These upgrades mean that JD.com has a Zacks Rank #1 (Strong Buy) rating.
Image Source: Zacks Investment Research
Deep Value Opportunity
When I say deep value, I mean very deep value. JD.com is currently trading at a one year forward earnings multiple of 8.9x. This is well below the industry average, and just a fraction of its five-year median of 47.6x.
Making it even more compelling is that EPS are projected to climb at an incredible pace over the next 3-5 years. As of now EPS are forecast to grow at an annual rate of 43.8%. That means JD has a PEG Ratio of just 0.2.
Image Source: Zacks Investment Research
Technical Setup
The technical picture in JD.com stock also offers investors a clean trading setup from which to measure risk. Over the last few days JD has been forming a bull flag just below a critical level of resistance. If the stock can break out from the bull flag, and clear resistance, it may see much higher prices soon.
Additionally, in the chart we can see that a double bottom formed earlier this year, potentially marking a major low of the stock and playing favorably for the bulls.
Image Source: TradingView
Bottom Line
At this point in time, JD.com has the trifecta – a top Zacks Rank, discounted valuation, and an A+ technical setup. Furthermore, the deeply bearish sentiment only adds to the bullish catalysts.
As noted, Chinese stocks are going come with some additional uncertainty, but for investors who can manage the risk JD.com may be the ideal setup.
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JD.com, Inc. (JD) : Free Stock Analysis Report
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