|Bid||29.08 x 2200|
|Ask||29.09 x 1800|
|Day's Range||28.81 - 29.24|
|52 Week Range||19.21 - 32.99|
|Beta (3Y Monthly)||1.41|
|PE Ratio (TTM)||198.78|
|Earnings Date||Nov 18, 2019 - Nov 22, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||35.88|
The trade war between the United States and China has been problematic for both nations, but despite the potential for economic strife both Beijing and President Donald Trump's administration appear to be digging their heels in. The conflict between the U.S. and China has hurt investors, especially those with exposure to China.Source: Sundry Photography / Shutterstock.com However, if you're a Warren Buffett disciple then you're probably looking out for undervalued Chinese firms that have been hit by the trade tension. And JD.com (NASDAQ:JD) may be just that. What is JD.com?If you're an investor then it's unlikely that you haven't heard of JD stock. However what makes JD stand apart from its peers like Alibaba (NYSE:BABA) is the firm's business model. Unlike BABA, JD got its start as a first-party seller. The firm stocks its goods in self-owned warehouses and has made a name for itself by offering a quality customer experience. Initially, the firm concentrated on selling big-ticket items to wealthy customers, but has since expanded into a wide variety of goods. InvestorPlace - Stock Market News, Stock Advice & Trading TipsBeyond its massive physical footprint, JD also carries a lot of value in its logistics business. With both of those aspects on firm footing, the company recently started adding third-party sales. Now merchants can stock their goods in JD controlled warehouses and use JD's logistics arm to ship. Plus, JD is also wading into the digital advertising space which has helped expand margins significantly. * 10 Undervalued Stocks With Breakout Potential The reason it's so important to understand JD's development is because it underscores the fact that the firm is moving out of the grunt work and into the reward. Building out an extensive warehouse and logistics network is difficult and expensive, but now that those assets are in place, JD can start to capitalize on them.Digital advertising and third-party sales are far more profitable than first-party selling and that's where JD is heading. It's encouraging as an investor to see a company that's laying the groundwork and is only just beginning to reap the rewards of high-margin business. Growth Is on the HorizonJD.com's most recent earnings report spotlighted the company's growth potential. The firm delivered better-than-expected results in just about every way possible which helped boost the stock by 15% in the days that followed. Revenue growth was 23% and margins were significantly higher -- even when you account for one-time tax benefits. A year ago, I cautioned that JD stock was in for a rough ride whether the trade war dies down or not. Back then, I worried that the firm was having to spend big in order to deliver growth. I pointed out that spending in order to facilitate growth isn't necessarily a bad strategy, but that investors might want to wait until the firm begins to grow organically before jumping in with both feet.That moment appears to have arrived. Golden Opportunity for JD StockWhat makes JD unique is the fact that the firm essentially shouted from the rooftops that its strategy is starting to pay off when it released its quarterly results last week. Investors responded and pushed the stock up 15% but the profit-taking has already begun. After nearing $32 per share at the beginning of this week, JD stock looks likely to make its way back below $30 before the week is over. JD stock lost 2% on Wednesday as investors squirreled away their profits and worries about the trade war weighed on Chinese stocks.Of course, there are still concerns about an economic slowdown in China -- but it's worth noting that the sluggishness in the Chinese economy doesn't seem to be pressuring consumer spending much, which is good news for JD stock. The bottom line here is that JD stock's e-commerce platform is growing in a country where online shopping is on the rise and the middle class is growing. The firm has already put in the hard work of building out its warehouse footprint and logistics network -- making now an ideal time to jump on board. The only dark cloud hanging over JD.com right now is the U.S.-China trade war, which could cause some bumpiness in the near term.However if you're a long-term investor looking to buy while the market is fearful of Chinese stocks, JD stock should definitely be on your short list.As of this writing, Laura Hoy did not hold any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post JD.com Stock Is a Risk that Long-Term Investors May Want to Take appeared first on InvestorPlace.
The Zacks Analyst Blog Highlights: China Life Insurance, JD.com, Qudian, China Southern and Sinopec Shanghai
It’s no secret that the Chinese eCommerce segment has developed into a burgeoning market. According to a recent Barclays report from analyst Gregory Zhao, the country’s large population and increasing disposable incomes suggest that its current penetration rate of 24% only stands to rise. Amid this backdrop, a new era of eCommerce is being ushered in. Zhao deems the resulting market structure a “three-kingdom phase”. “Competition has become less about user traffic, with the focus now turning to the evolution of ecosystems, with value added services like payment, logistics, media content, marketing solutions, and offline retail integration. Based on this, Alibaba is still our preferred name in the space,” he stated. In the report, the 1.5-star analyst provides his take on Alibaba (BABA) and 2 other Chinese eCommerce Stocks.Let’s take a closer look at what the analyst had to say about each. JD.com Inc. (JD)JD has managed to pull off quite the turnaround. The company has demonstrated significant margin improvement in its last few quarters thanks to an investment in expanding its geographic operations and optimizing warehouse logistics with robotics. While this investment had a negative impact on margins in the short-term, JD is now on the right track with margins expanding by 60 bps in Q2 vs 20 bps in the previous quarter. Revenue growth has also stabilized, with it gaining 23% from the prior-year quarter. Not to mention JD is starting to embrace the team-buy model and prioritize its direct access to users on WeChat to acquire long-tail users, in order to combat the slower user growth it saw in the second half of 2018. Zhao notes that this should benefit ads and commission revenue growth on its marketplace. That being said, the eCommerce company still has a long way to go. “While new initiatives such as logistics and tech services provide another avenue for growth, we think the above positives have been fairly reflected in the consensus and stock price during the re-rating post 2Q earnings. In addition, while JD focuses on the retail market, it may miss some significant opportunities such as in Cloud and payment,” Zhao explained. As a result, the analyst initiated coverage with a Hold and set a $36 price target on August 19. His price target suggests shares could gain 15% over the next twelve months, with the stock already up 4% in the last five days. The rest of the Street takes a slightly more optimistic stance on JD. It has a ‘Moderate Buy’ analyst consensus and a $37 average price target, implying 21% upside potential. Pinduoduo Inc. (PDD) This Chinese eCommerce stock has made substantial headway in its efforts to gain market share with its unique team-buy social-eCommerce marketplace model. Its platform allows users to share product information on social media networks like WeChat and QQ as well as form shopping teams to get a lower prices on their purchases.“We prefer PDD to JD, in addition to PDD's better use of social network resources, we view a larger monetization potential during its move toward high-end markets,” Zhao noted.This strategy appears to be paying off for PDD. According to its August 21 Q2 earnings release, monthly active users rose by 88% from the year-ago quarter to reach 366 million. Management attributed this growth to company’s user-first strategy as well as its shopping festival campaign. The company also highlighted the fact that customers have been impressed with PDD’s move up to large-ticket items, its effort to improve the brand image and stock keeping unit expansion into branded products.However, it should be noted that PDD reported operating loss more than doubled to RMB1.5 billion ($212.4 million) compared to RMB6.6 million ($934,500) in the prior-year quarter. Even with this loss, the Barclays analyst believes PDD’s strategy will drive sustainable long-term growth. “While the Street is concerned about PDD's profitability in intensive marketing, we regard this investment as necessary at the current stage. In the long run, we expect upside in its ARPU and take rate during its expansion into the high-end market, along with an improving margin profile,” Zhao explained. Based on all of the above factors, he initiated coverage with a Buy and set a $32 price target on August 19. The analyst believes share prices could surge 6% over the next twelve months. This is on top of the 28% growth the company has seen over the last five days.All in all, the consensus among analysts is that PDD is a ‘Moderate Buy’. Its $27 price target suggests 11% downside. Alibaba Group (BABA) It’s easy to see why the last stock on our list is widely considered to be the China equivalent of eBay (EBAY) and Amazon (AMZN). With 55% market share, Alibaba has cemented itself as the top player in the space.BABA’s “new retail” strategy centers around combining the best of both online and offline commerce to provide a shopping experience for the customer. The company creates this experience through three main eCommerce sites: Alibaba.com, its international trade site, Taobao, a Chinese online shopping website and Tmall, a Chinese-language website for business-to-consumer online retail. So far, investors like what they see. On August 15, BABA reported revenue of RMB114.9 billion ($16.7 billion) or a 42% year-over-year gain. Adding to the good news, user acquisition programs which deepened its penetration into less developed areas drove a 20 million increase in annual active users. By no means is the company stopping there. BABA’s cloud products alone generated RMB7.8 billion ($1.1 billion) in quarterly revenue, up 66% year-over-year thanks to the launch of over 300 new products and features in Q2. The company is also expanding its product offerings to include digital payments, online entertainment and food delivery.Based on all of these positive developments, Zhao points to BABA as most poised to outperform. “Alibaba is still our preferred name in the space, given its top market position, attractive valuation and monetization perspective,” he explained. As a result, he reiterated his Buy rating and $225 price target. With shares already climbing 8% in the last five days, the analyst sees even more upside as his price target suggests 28% upside. Wall Street mirrors Zhao’s sentiment, with the consensus among analysts being that BABA is a ‘Strong Buy’. Its $224 average price target suggests 28% upside potential.
I'm a long-term bull on China stocks. Even as a long-term bull, however, I recognize that beaten up China stocks won't rebound until China's economy stops slowing.Fortunately, over the past few weeks, several signs and trends have emerged which imply that China's economy is starting to curb its slowdown. Those signs and trends are as follows: * OECD Leading Indicator Trending Higher: The OECD's Composite Leading Indicator (or CLI) for China, which has been compressing since late 2018, has improved every month from February through June 2019. * OECD Consumer Confidence Trend Has Bounced Back: Similar to the OECD's CLI, the OECD's Consumer Confidence Index (or CCI) for China compressed throughout 2018, but has rebounded in 2019. * Retail Sales Trends Improved in 2019: The retail sales growth trend in China has improved from 8.1% to 8.2% in the last two months of 2018, to 8.3% through the first seven months of 2019, including an average gain of 8.7% over the past three months. * Manufacturing Activity Shows Signs of Bottoming: China's Purchasing Manager's Index (PMI) reading compressed rapidly throughout 2018, but has shown signs of stabilizing between 49 and 50 in 2019. * Trade Data Stabilizing: Amid a trade war with its biggest trading partner, China's trade data -- both imports and exports -- has been sluggish over the past several months. But, June trade data was much better than expected on both the imports and exports side.All these signs and trends may just be a series of head-fakes. But, I don't think so.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Marijuana Stocks to Ride High on the Farm Bill Instead, the volume of data here strongly suggests that China's economy is finally starting to stabilize, and that means it's time to start buying the dip in high-quality China stocks, most of which still have compelling long-term upside. China Stocks to Buy on the Dip: Alibaba (BABA)Source: Nopparat Khokthong / Shutterstock.com Long-Term Bull Thesis: The long-term bull thesis on Alibaba (NYSE:BABA) is very simple. China has more than 1.4 billion people. Less than 60% of those people are connected to the internet, versus a 90% internet penetration rate in North America. Over the next decade-plus, as China's consumer economy urbanizes and digitizes, China's internet penetration rate will rise towards 90%, implying hundreds of millions of new shoppers in China's e-retail ecosystem.Most of those shoppers will do the bulk of their e-retail shopping on Alibaba. Thus, over the next decade-plus, Alibaba's revenues and profits will stay on a big growth trajectory. That big profit growth will push BABA stock higher in the long run.Near-Term Bull Thesis: The near-term bull thesis on BABA stock has everything to do with margins. Specifically, Alibaba has never had a problem with revenue growth. Thanks to secular e-commerce tailwinds, Alibaba has been a 20%-plus revenue growth company for a long time. * 10 Undervalued Stocks With Breakout Potential Alibaba's margins have been under tremendous pressure over the past few years, thanks to big growth investments and competitive pressures. Over the past few quarters margin trends have improved significantly. If these margin improvements persist, BABA stock could continue to move materially higher in the near-term. JD.Com (JD)Source: Sundry Photography / Shutterstock.com Long-Term Bull Thesis: The long-term bull thesis on JD.com (NASDAQ:JD) mirrors the long term bull thesis on Alibaba. A ton of consumers in China, a significant portion of whom still aren't connected to the internet, imply huge growth potential over the next several years for China's e-commerce marketplace and its biggest players -- Alibaba and JD.On top of that, JD is also looking to expand internationally, and that international expansion provides a huge growth opportunity for the company in the long run. JD projects as a big growth company for a lot longer, and all that growth should propel JD stock higher in the long run.Near-Term Bull Thesis: Also much like Alibaba, the near-term bull thesis on JD stock has everything to do with margins. JD employs a very similar model to Amazon (NASDAQ:AMZN). Consequently, the company has historically run at anemic margins. But, margins in 2019 have improved meaningfully as the company has reaped the rewards of 2018 efficiency-related investments.These investments should continue to yield margin-expanding rewards for the next several quarters. As margins continue to track higher, so should JD stock. Vipshop (VIPS)Source: madamF / Shutterstock.com Long-Term Bull Thesis: At the risk of sounding like a broken record, the long term bull thesis on online discount retailer Vipshop (NYSE:VIPS) centers around the idea that China's e-commerce market is in the first few innings of a massive growth narrative which will ultimately power sustained growth at Vipshop.Specific to Vipshop, you have a company which dominates the online discount niche. Looking over at the U.S. retail landscape, the discount niche is a very valuable one (see Dollar General (NYSE:DG), TJX Companies (NYSE:TJX), or Five Below (NASDAQ:FIVE)). As such, U.S. comps imply that Vipshop has a bright future as the go-to online discount retailer in China.Near-Term Bull Thesis: As is the case with every other China e-commerce stock, the near-term bull thesis on VIPS stock has to do with the fact that -- for the first time in several years -- Vipshop's margins are meaningfully improving. This big improvement was on full display last quarter, when gross and operating margins both increased nearly 300 basis points year-over-year. * The 10 Best Cheap Stocks to Buy Right Now The implication is that this margin improvement will persist, driven by continued cost-cutting and logistics improvements. As margins continue to trend higher over the next few quarters, so will VIPS stock. Ctrip.com (CTRP)Source: rafapress / Shutterstock.com Long-Term Bull Thesis: The long-term bull thesis on online travel service provider Ctrip.com (NASDAQ:CTRP) revolves around one critical statistic: passenger flight volume per capita. In 2015, America's passenger flight volume per capita was 2.5. In most developed economies, it was either near or above 1. China's passenger flight volume per capita in 2015 was around 0.3.This discrepancy implies huge room for China air travel volume growth over the next several years. China is projected to be the fastest-growing air travel market over the next several years. It's also projected to become the biggest air travel market by 2024. As China's air travel market rapidly expands over the next several years, China's go-to air travel booking site, Ctrip.com, will benefit from big traffic, revenue, and profit growth. All that growth will ultimately power CTRP stock higher in the long run.Near-Term Bull Thesis: The near-term bull thesis on CTRP stock ties back into this idea that China's economy is stabilizing. Specifically, air travel is a very economically sensitive industry. That is, when times are good and consumers have extra cash to spend, they often spend it on travel. The converse is true, too.Consequently, as China's economy stabilizes and starts to improve over the next several quarters, China's air travel trends should start to similarly improve. As they do, Ctrip's numbers will meaningfully improve, which should spark a nice recovery rally in CTRP stock. Bilbili (BILI)Long-Term Bull Thesis: From where I sit, the long-term bull thesis on Bilibili (NASDAQ:BILI) looks a lot like the long-term bull thesis on Pinterest (NYSE:PINS). That's not to say these two platforms are the same. They aren't. Pinterest is a visual discovery platform. Bilibili is an anime gaming and comic-focused video platform.These two companies do have similar characteristics: huge user bases, unique value props, and nascent but growing ad businesses. The implication for Bilibili and Pinterest is that -- as these companies build out their revenue models over the next several years -- their huge user bases will translate into huge revenues and profits, and ultimately huge market caps.This dynamic is already playing out at Pinterest. It will play out at Bilibili in a similar fashion over the next several years.Near-Term Bull Thesis: Near-term, BILI stock looks good because it increasingly appears that China's economic stabilization is having a positive impact on China's digital ad market. Specifically, Weibo (NASDAQ:WB) and Baidu (NASDAQ:BIDU) are two Chinese digital ad companies which have struggled over the past few quarters. But, last quarter, each company reported better-than-expected numbers. The implication? China's digital ad market is finally improving. * 15 Growth Stocks to Buy for the Long Haul That's great news for Bilibili. Unlike Weibo and Baidu, Bilibili has maintained a big growth rate over the past few quarters as the ad market has slowed. Now that the market is ramping back up, Bilibili's numbers next quarter should be extra good. If so, that will spark a healthy rebound rally in beaten up BILI stock. Weibo (WB)Source: testing / Shutterstock.com Long-Term Bull Thesis: The long-term bull thesis on Chinese micro-blogging site Weibo revolves around the idea that this company is, for all intents and purposes, the Twitter (NYSE:TWTR) of China. There are just three big differences.One; Weibo has way more daily active users (211 million, versus 139 million at Twitter). Two; Weibo is more profitable (38% year-to-date EBITDA margins, versus 35% at Twitter). Three; Weibo makes way less revenue per user (Q2 ARPU of about $2, versus around $6 at Twitter).The first two differences are positives for Weibo. The third is a negative. Presumably, Weibo's unit revenue trends will improve as their ad targeting capabilities improve and as China's ad market matures. As this discrepancy narrows, so will the market cap difference between Weibo ($10 billion) and Twitter ($30 billion) -- implying huge growth potential for WB stock in the long run.Near-Term Bull Thesis: The near-term bull thesis on WB stock has to do with two things. First, revenue trends are turning around. Over the past several quarters, revenue growth has been trending down every quarter. Next quarter, though, management is guiding for revenue growth to improve sequentially.Second, margin trends are improving. Over the past several quarters, margins have been under pressure. Last quarter, that pressure eased in a big way.So long as revenue and margin trends improve from here, then beaten-up WB stock should bounce back in the near term.As of this writing, Luke Lango was long BABA, JD, AMZN, TJX, FIVE, CTRP, and BILI. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks to Ride High on the Farm Bill * 8 Biotech Stocks to Watch After the Q2 Earnings Season * 7 Unusual, Growth-Oriented REITs to Buy for Your Portfolio The post 6 China Stocks to Buy on the Dip appeared first on InvestorPlace.
Despite the negatives, JD.com (NASDAQ:JD) managed to blow away critics last week with a fantastic earnings report.Source: Shutterstock Everyone knows the current economic situation in China is rather unfortunate. The trade war with the United States keeps getting worse and worse. The Yuan recently broke below 7 and appears to be on the cusp of a significant devaluation. And the protests and uncertainty in Hong Kong keep intensifying. All in all, investors have a lot of jitters around Chinese stocks.That only makes it more amazing that the earnings release sparkled from top to bottom, with the company beating on revenues, earnings, and a lot of details that we'll get into. JD stock took off, rising 15% in the days following the earnings report.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWill the good times keep up? There's obviously still the macroeconomic concerns that aren't going anywhere anytime soon. And at least one plus from this earnings report isn't likely to last forever. Still, the central bearish thesis on JD stock has now been invalidated. The company can continue to grow rapidly while also delivering rising profit margins. A Fantastic QuarterJD stock rocketed up last week, and with good reason. The company's latest earnings report was simply amazing. It beat on revenues by nearly a billion dollars for the quarter, posting $21.9 billion against expectations of just $21 billion. That resulted in a far faster than expected year-over-year revenue growth rate of 23%. * 10 Cheap Dividend Stocks to Load Up On Incredibly, with revenues shooting up, JD also managed much higher profit margins. Non-GAAP earnings of 33 cents per share utterly blew away analyst expectations of just eight cents per share. Now, to be fair, some of this was due to a tax benefit that may not continue in the coming quarters. But a good chunk of it is simply from JD earning higher margins; this was their best operating margin in more than two years, in fact.The market had gotten the idea that JD was essentially paying for growth. When it wanted to post faster growth, it would up marketing spend or discount big-ticket items like electronics, thus whacking its profit margin.This quarter demonstrated that the bears appear to be wrong. The company's efforts to build scale and exploit its large competitive advantage in logistics is starting to pay off with durable operating results. JD Profit ExpectationsI own JD stock and have been involved for quite a while. As a result, I've seen both the company's up and down quarters. Unfortunately, a lot of investors don't seem to be that familiar with the CEO's growth strategy and thus extrapolate too much out of one or two quarter's of results.In the past, whenever JD announces a big quarterly profit, people assume that EPS is going to shoot up. Similarly, when margins go down, everyone starts panicking.Both reactions are not well-founded. That's because JD founder and CEO Richard Liu has repeatedly said that the company will reinvest profits back into the business. When profits go up, the company subsequently invests more in growth. Similarly, when profits slide, JD scales things back a bit.Why adopt this sort of strategy? JD has clearly said from the outset that it wants to mimic Amazon (NASDAQ:AMZN). A key part of that company's success was earning enough cash flow from operations so as to keep expanding without having to dilute the stock heavily or take on much debt.However, Amazon never cared much about accounting earnings in its formative years. The bears repeatedly said AMZN stock was wildly overvalued because they looked for accounting profits. But the real thing to watch was cash flow and the ability to keep growing.JD is running the same model. Whatever profits the company can make now are better put to use in expanding the business further. JD has a ton of competition both in China and in the other markets it is attempting to expand into. We're in the early innings of JD's growth story, so why should management get hung up on high reported profits now? JD Stock VerdictWhen you own JD stock, everyone wants to compare it to Alibaba (NYSE:BABA). And sure, Alibaba is still a much larger business than JD, but that's more than reflected in the market caps.Alibaba has a $460 billion market cap right now, and JD has a $46 billion market cap. Despite having only a tenth of Alibaba's market value, JD actually does more in annual revenues than Alibaba. Additionally, JD has 321 million active customer accounts - that's half of Alibaba's figure and equal to the entire population of the United States.Revenue is growing at more than 21% a year, margins spiked up and JD is guiding margins to be above 2017 levels through the end of the year (when the stock was up at $50). Meanwhile, JD's new business lines are paying off, revenues there grew 70% year over year.All this good stuff is happening, we must recall, during a major economic downturn in China. Get a trade deal with the U.S., and things turn even more interesting.Long-term, if JD continues to execute, it's easy to see a path to JD being worth $100 billion or more in the market, leading JD stock to a valuation of at least $65/share. If you want to invest in Chinese e-commerce, make sure to own JD stock before the trade war ends.At the time of this writing, Ian Bezek owned JD stock. You can reach him on Twitter at @irbezek. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post JD Stock Is a Strong Buy Following a Spectacular Earnings Report appeared first on InvestorPlace.
Alibaba Group's (NASDAQ:BABA) second-quarter results fulfilled most bullish expectations of the owners of Alibaba stock.Earnings of $1.83 per share easily beat estimates of $1.50. Sales of $16.74 billion were up 42% versus the same period a year earlier. The company's cloud revenue jumped 66%. year-over-year Source: Shutterstock For weeks. I've called Alibaba stock invincible, and a core holding. I called BABA stock one of the best names to own now, and said buying Alibaba Group before BABA's earnings was investors' best chance to maximize profit. InvestorPlace - Stock Market News, Stock Advice & Trading TipsWhat the results from Alibaba Group and its rival, JD.Com (NASDAQ:JD) prove, is that the Chinese consumer wasn't hunkering down last spring, anticipating trouble ahead. Instead, they were buying goods with both hands.But what about the future? * Major Headlines Mean Opportunities for Smart Investors The Storm Clouds GatherOn the surface, Alibaba Group exudes confidence about its future.It is buying Kaola, the largest online merchant that sells imported goods to Chinese consumers, from Netease (NASDAQ:NTES) for $2 billion. Alibaba co-founder Joseph Tsai is buying the Brooklyn Nets and their arena for $2.35 billion. But China faces an existential tipping point, one that Alibaba symbolizes. Alibaba Group is built on human capital, on people like Tsai thinking creatively and deeply about things like supply chains and software. But the best minds don't just think about business and sports.The Nets' previous owner, Mikhail Prokhorov, also thought money would immunize him from what was happening back in his home country, Russia. It didn't. And it won't for Tsai,who is reportedly worth $9.3 billion, either. The Hong Kong QuandaryIn Q2, the owners of Alibaba stock approved an 8:1 stock split in preparation for a new listing of BABA stock in Hong Kong next month.The Hong Kong exchange, like American exchanges, doesn't require corporate democracy. Dual-share structures like Alibaba's, in which the managers control a company without owning a majority stake, are not allowed on the Shanghai Exchanges. So if China decides to kill Hong Kong's autonomy, it will also be cracking down on Alibaba's corporate structure.People can't be told to think creatively about money and not be expected to think about their future. After losing most of the 20th century to anarchy, Chinese people have a strong preference for order over liberty. But all the Chinese people I know do love liberty.Alibaba has an extensive presence in Hong Kong. It owns the South China Morning Post, Hong Kong's leading newspaper. It wants to reach Chinese investors through Hong Kong's exchange. But it may have to embrace free thought to accomplish that goal. The Bottom Line on Alibaba StockFor Alibaba stock, success covers a multitude of sins.But today, economic growth requires human capital. To do their best mental work, people must be free. Money has made Alibaba Group executives Jack Ma and Joe Tsai as free as any American billionaire.But what about the people who work at Alibaba's headquarters in Hangzhou? How much liberty will they demand, and what risk to order will their demands create?As long as that's an open question, the gains of BABA stock will be limited.Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O'Flynn and the Bear, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BABA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post The Big Questions Facing Alibaba Stock appeared first on InvestorPlace.
Shares of JD.com (NASDAQ:JD) soared on Tuesday. JD stock gained nearly 13% after its second-quarter earnings came in well ahead of analysts' average expectations.Source: Sundry Photography / Shutterstock.com And there's a simple reason why JD.com stock can keep climbing. Specifically, even after those gains, JD.com is up only 2% over the past month. That's because JD stock dropped 17% in five sessions a couple of weeks ago on fears of an escalating trade war, and Tuesday's gains only recaptured most of those losses.In other words, the good news from JD's earnings doesn't seem priced in. And that, in turn, suggests that JD could keep moving higher, as long as the company gets a little bit of outside help.InvestorPlace - Stock Market News, Stock Advice & Trading Tips JD.com Crushes EstimatesCompared with analysts' average expectations, JD.com had a truly impressive quarter. Its earnings per share of 33 cents, excluding certain items, was 25 cents above the average estimate. That was the company's biggest earnings beat since its 2014 IPO. JD's year-over-year revenue growth of almost 23% was more than five percentage points better than the Street's average expectation.On an absolute basis, too, the results looked strong. The 22.9% increase in its sales was a notable acceleration from the 13% growth that JD.com reported in Q1. And its net income, excluding certain items, increased more than 600% year-over-year. * 10 Stocks Under $5 to Buy for Fall And it's how JD grew its sales and profits, not just by how much they increased, that helps the bull case on JD stock. When JD.com sold off last year, worries about a potential trade war and its impact on the Chinese economy were key drivers of the decline . But investors also fretted about the company's higher spending, which pushed profits to nearly zero in Q2 of 2018.In Q2 of this year, however, JD managed to drive strong growth while posting a modest increase in gross margin and, more importantly, controlling its operating expenses. Its fulfillment expenses only rose at half the rate of its revenue. Furthermore, its marketing spending increased less than 7%, and its general and administrative spending increased only 5%. JD.com's spending on technology jumped 34% year-over-year, but that line item amounted to less than 2.5% of its revenue.That focus on cost control is much-needed, and not just for JD.com. NetEase (NASDAQ:NTES) stock rallied after its Q2 results showed that its cost leverage had driven solid profit growth. Investors have wanted Chinese stocks to start showing some margin improvement, and NTES and JD.com both delivered.JD.com's Q2 results showed that the company is moving in the right direction. And so it's a little surprising that JD stock has not responded more favorably to the results. Why JD Stock Should Keep Moving HigherIt seems that JD.com stock can -- and maybe should -- move even higher. Again, the stock trades below where it did on July 30, before JD.com posted a blowout quarter and the U.S. decided to postpone additional tariffs. At this point, the outlook of JD stock seems to be stronger than it was two weeks ago, and yet JD stock is cheaper than it was then.And JD.com is getting close to cheap or at least, it's not quite that expensive. Heading into Q2, analysts' average 2019 EPS estimate for the full year was 68 cents. JD.com now has generated 66 cents in non-GAAP EPS in just the first two quarters of the year.JD can generate EPS of over $1 in 2019, which would put its price-earnings multiple below 30. In 2o20, that multiple could drop to the low- to mid-twenties.That multiple isn't necessarily that cheap in the context of Chinese stocks right now. Rival Alibaba (NYSE:BABA) trades at less than 20 times the average fiscal 2021 EPS estimate. Internet plays Baidu (NASDAQ:BIDU) and Weibo (NASDAQ:WB) are even cheaper.But JD.com's thin margins, still only 2%+ in Q2, still have much more room to increase. And thus there's more room for the company's profit to grow, making a higher multiple justified.JD does pose some risks. JD.com hasn't always been the most consistent performer. Sentiment toward Chinese stocks on the whole still looks shaky -- and that goes double for Chinese tech, as I wrote last month. As a result, in the near-term, JD stock might be choppy.Still, for Chinese bulls, JD stock looks awfully attractive. And there appears to be room and reason for its post-earnings gains to continue.As of this writing, Vince Martin did not hold any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks Under $5 to Buy for Fall * 5 Stocks to Avoid Amid the Ongoing Trade War * 7 5G Stocks to Buy Now for the Future The post JD.com Stock Can Keep Climbing appeared first on InvestorPlace.
Fears of recession ebb after White House considers tax cuts for millions of workers, China unveils new interest rate reforms and Germany hints at stimulus measures.
Shares of Chinese tech giant JD.com are up 12% in the last week. JD shares were up close to 2% in early market trading today as well.
Chinese internet search giant Baidu (NASDAQ:BIDU) is set to report second-quarter numbers after today's bell and I'm not too optimistic on BIDU stock ahead of the print.Source: StreetVJ / Shutterstock.com From a high-level perspective, it does appear that China's economy is rebounding. Economic data coming out of China has meaningfully improved over the past several months. Meanwhile, Chinese tech heavyweights Alibaba (NYSE:BABA), JD.Com (NASDAQ:JD) and Tencent (OTCMKTS:TCEHY) all recently reported strong quarterly numbers.But two of those three companies -- JD and Tencent -- said on their earnings calls that the ad market in China remains incredibly challenging. Tencent's ad business actually slowed this quarter. Baidu gets most of its revenue from its ad business. As such, with the broad read from recent reports being that China's ad business remains under tremendous pressure, the chance of Baidu reporting favorable numbers is not great.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThat's why I'm avoiding BIDU stock this earnings season. This stock is in a big secular decline because its numbers have consistently disappointed investors. Those numbers will likely continue to disappoint for the foreseeable future. Thus, while Baidu stock is pretty cheap, it's still too risky to try and catch this falling knife.The big implication here? Stay until away until there's reason to come back. Baidu's Numbers Likely Won't Be GoodThe big reason to avoid BIDU stock ahead of the Q2 print is because it looks like the numbers won't be that good. * 7 Safe Dividend Stocks for Investors to Buy Right Now Baidu has a lot of moving parts. But, at its core, this is the Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) of China. As such, Baidu is an advertising business. Specifically, this is a search advertising business. But, the whole digital ad market in China -- and specifically the search ad market -- is dramatically slowing, mostly because it's oversaturated and because the entire economy is slowing.In these slowing markets, Baidu is also losing share. This share erosion has two drivers. One, alternative ad formats are more compelling (like in-feed and social). Two, Baidu is staring at elevated competition in the search game.Net net, Baidu is losing share in a slowing market. This has caused core revenue growth rates to slow from 50%-plus a few years ago, to under 20% last quarter. At the same time, Baidu is aggressively investing in alternative growth arenas to re-stimulate growth. This big spend is killing margins. Slowing growth plus falling margins equals tumbling profits. That's exactly what's happening. BIDU stock's earnings per share is expected to be cut in half this year.It does not appear that the Q2 print will have anything in it that will change the course of this downbeat narrative. JD said in its recent conference call that the China ad market remains under great pressure. Tencent had a similar tone in its conference call, citing a challenging digital ad macro environment as the reason why their digital ad business slowed from 25% growth in Q1 to 16% growth in Q2.If JD and Tencent -- two companies whose ad businesses have been relatively strong -- struggled this past quarter on the ad front, then it's pretty likely that Baidu -- a company whose ad business has been in free-fall -- struggled too. Continued bad numbers from Baidu won't be enough to shake BIDU stock out of its multi-quarter downtrend. Baidu Stock Is Cheap -- But the Worst May Not Be OverZooming out, Baidu stock is unequivocally very cheap in the big picture.Revenue growth trends are falling flat this year. But they will probably improve over the next several years as Baidu adapts its ad business to be more relevant in China's double-digit growth ad market. Thus, Baidu should be able to start stabilizing market share over the next several years, which should lead to renewed and consistent double-digit revenue growth. Revenue growth consistency will allow the company to pull back on big growth-related investments, so margins should improve too.Realistically, Baidu could grow revenues at a roughly 10% rate from 2019 into 2025, while adjusted operating margins could bounce back to 20% (where they were in 2018). Those assumptions make $15 in EPS seem doable for Baidu by 2025. Based on a market average 16-forward multiple, that implies a 2024 price target for BIDU stock of $240. Discounted back by 10% per year, that equates to a 2019 price target of roughly $150.That's more than 50% higher than where Baidu stock trades today. Thus, BIDU stock is undervalued.But, it will remain undervalued until investors have reason to believe that Baidu will stabilize its share in China's slowing digital ad market. That won't happen this quarter. As such, for the foreseeable future, BIDU stock will likely remain undervalued. Bottom Line on BIDU StockAt some point, Baidu stock will stage a huge, rip-your-face-off rally. But not today. That rally won't happen until Baidu proves that it can stabilize share in the slowing China digital ad market, and thereby, stabilize margins and profits. Baidu won't prove that this quarter. Until it does, it's best to stay away from this falling knife.As of this writing, Luke Lango was long BABA, JD and GOOG. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post Baidu Stock Looks Risky Ahead of Earnings appeared first on InvestorPlace.
(Bloomberg) -- Hong Kong demonstrators will need to look beyond mainland China for supplies of protest gear that’s defined the look of the movement.Queries on Chinese e-commerce portals such as Alibaba Group Holding Ltd.’s Taobao for umbrellas, masks and helmets would return the searches as “item not found” for buyers based in Hong Kong, while those on the mainland had positive results. Hong Kong logistics companies said a list of “sensitive items” which include black T-shirts, banners, laser pens and facial masks will be detained at customs.Protests in Hong Kong have dragged on since early June, with the government warning of the damage to the economy and the city’s reputation. Police have used tear gas and rubber bullets on demonstrators who linger after peaceful rallies ended, and the confrontations have turned increasingly violent in recent weeks.In such fights, protesters wear gas masks and helmets, and police have said some target strong laser beams at them. After entering search queries, e-commerce site JD.com showed helmets and laser pens are “out of storage for Hong Kong and Macau.” A representative of Hong Kong’s customs says it didn’t receive any directive to control the import of protest-related items, and it doesn’t know if there are any restrictions from mainland customs. Outside of business hours, a call to China’s customs went unanswered, while representatives for JD and Alibaba, which owns Taobao, didn’t immediately reply to requests for comment.According to a notice on the website of Hong Kong logistics company Dailybuyco.com, customs has strengthened controls over imports and exports. The current list of “sensitive items” also includes towels, umbrellas, glow sticks, flashlights and helmets. The list, as defined by the customs, is constantly changing, the website said, without specifying if it was Hong Kong or China authorities.Another delivery company Taopai.hk posted a similar notice earlier this month, saying that customs and the Hong Kong government are posting restrictions over imported goods, including yellow umbrellas, yellow helmets, iron pipes and knives. No “goods for riot” can be transported in freight, the post said.To contact the reporter on this story: Jinshan Hong in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Shamim Adam at email@example.com, Fion LiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
China's e-commerce company JD.com is in talks with bankers to list shares of its online grocery and delivery joint venture in the United States in May and is seeking to raise $500 million, The Information reported on Friday. The talks are still in early stages, and the amount the company hopes to raise as well as the timing of the stock market offering could change, the report said, citing two people familiar with the matter. JD and Walmart did not immediately respond to requests for comment.
Alibaba Group (NYSE:BABA) stock posted its quarterly earnings before market open this morning, but its strong first-quarter results beat are not likely to matter. The day before, Aug. 14, the Dow Jones Industrial Average fell 800 points. Fear in the markets is rising and threatens to scare off investors from China-based stocks.Source: BigTunaOnline / Shutterstock.com Despite the market volatility in the short term, what is there to like from Alibaba's first-quarter results?Before diving into its fiscal first-quarter numbers, look first at what Alibaba reported in the previous quarter. In its last quarter, BABA stock posted non-GAAP earnings per share of $1.28 (GAAP EPS of $1.47), with both figures beating expectations by a wide margin. Revenue grew a solid 51%, rising to $13.93 billion. After the results, BABA stock fell from around $195 to as low as $150 a month later. The U.S.-China trade war started intensifying at the time, pressuring investors to dump China-based stocks like Alibaba.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWithout that trade war, Alibaba stock should have traded well into the $210 range and higher. Instead, at a recent closing price of $162, its price-to-earnings ratio is just 4.3 times while its PEG ratio was 1.23.For its Q1, analysts had a consensus EPS estimate of $1.49 on revenue of $15.86, up roughly 30% from last year. And with all 18 analysts calling Alibaba stock a "buy" with an average price target of $218.94 (per TipRanks), investors must hold the stock and sit tight. Alibaba Stock's First-Quarter ResultsAlibaba reported earnings of $3.55 billion on revenue of $16.74 billion, up 204% from last year. Chinese stocks are suffering from the trade war yet Alibaba managed to cushion the negative impact of lower exports. Strong domestic demand lifted the active consumer base by 20 million. Active annual consumers at its China-based retail marketplaces reached 674 million. Core commerce revenue grew a solid 25% year-over-year, digital media advertising grew 6%, while cloud computing grew 66%, to $1.13 billion. * 10 Stocks Under $5 to Buy for Fall Drilling into the segments, the company's core commerce generated $14.14 billion, cloud computing generated $93 million and innovation initiatives generated$18 million. The cloud computing is the only segment that did not beat consensus. Still, an increase in average revenue per customer led the revenue growth for the cloud unit. In the June quarter, Alibaba launched over 300 new products and features related to the core cloud offerings. As it continues investing heavily in talent and technology infrastructure, Alibaba Cloud will continue growing. Strong Performance at Alibaba's Retail UnitThe fast-growing consumer community at Taobao lifted the growth in core commerce. Active annual customers grew, helped by referral programs through the Alipay app and a record-breaking 6.18 Mid-Year shopping Festival. Taobao expanded its market reach by attracting customers in less developed areas.Tmall, formerly the Taobao Mall, leads the consumer engagement and distribution platform for Chinese brands. During the quarter, the gross merchandise volume of physical goods, excluding unpaid orders, grew 34% year-over-year. Higher user numbers and average spending drove the growth in sales. Unavoidable Macro HeadwindAlibaba could have reported results as impressive as that of JD.com (NASDAQ:JD) but will not enjoy as big a jump in the stock price in the coming days. JD.com's market cap is 10 times smaller than that of Alibaba stock. Plus, the stock price is in the $160 range, which makes shares less liquid for small-time investors. When Alibaba splits its shares at 8:1, expect bigger rallies in future earnings reports. Writer William White explained the BABA stock split here.For its second quarter, JD.com reported revenue growing 23%, while earnings of $0.33 beat consensus by 25 cents. Service revenue grew 42% year-over-year while its operating cash flow almost doubled, to $4.53 billion. Its stock enjoyed a bounce of more than 10%. Whether an investor holds JD.com or Alibaba, the long-term prospects are strong for these firms. Alibaba is more comparable to Amazon (NASDAQ:AMZN). Both firms have a hugely successful online retail channel on the desktop and mobile, and Alibaba's cloud services is certain to bring in high profit margins in future quarters. At a forward P/E of 53 times, Amazon trades at a big premium compared to Alibaba. Alibaba's forward P/E is 19 times Bottom Line on BABA StockAlibaba will enjoy just a small bounce post earnings despite the company's outlook looking stronger than ever. Investors who remain unconcerned over the ongoing trade war should accumulate Alibaba stock.As of this writing, Chris Lau did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks Under $5 to Buy for Fall * 5 Stocks to Avoid Amid the Ongoing Trade War * 7 5G Stocks to Buy Now for the Future The post After Another Strong Quarter, Alibaba Stock Will Reward Long-Term Investors appeared first on InvestorPlace.
(Bloomberg) -- Baidu Inc. has dropped off the list of China’s five most valuable internet companies, underscoring the challenges facing the search giant from a weakening economy to intensifying competition.NetEase Inc., China’s second-largest gaming house, has overtaken Baidu in market value after posting better-than-expected quarterly earnings last week. Shares of NetEase have gained 11% this year, while Baidu’s plunged 40%. The latter company, once touted as a member of China’s internet triumvirate alongside Alibaba Group Holding Ltd. and Tencent Holdings Ltd., has bled $66 billion of capitalization since its peak in May 2018 -- the equivalent of one Morgan Stanley.Baidu has struggled to fend off competition from the likes of Tencent and ByteDance Inc., both of which are luring smartphone-savvy consumers and advertisers to their popular mini-video and social media apps.The company enjoyed a near-monopoly in Chinese internet search after Google departed the market in 2010 over government censorship. This week, ByteDance launched its own standalone search engine, posing a serious threat to the almost two-decades-old Baidu. The company was previously pushed out of the Top 3 in market value by e-commerce operator JD.com Inc. and food delivery service Meituan.Baidu, together with rivals Alibaba and Tencent, has long formed part of a trio of leading internet companies known by the acronym BAT. Now even that title seems under threat, with some dubbing ByteDance the new “B” in the group. Baidu in May posted its first quarterly loss since its 2005 stock market debut, after the Chinese economy slowed and rivals chipped away at its advertising sales.To contact the reporter on this story: Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.