JD.com, Inc. (NASDAQ:JD) got a boost in late August following the release of a well-received earnings report. However, shares of the Chinese e-commerce company have had trouble building upward momentum, as investors worry about rising global tensons between the US and China. Is now the time to buy?
Strong Earnings in a Complex Region
In late August, JD delivered a strong second quarter earnings report that included better-than-expected results on both the top and bottom lines. The Beijing-based company sported Q2 non-GAAP EPS of $0.61, which exceeded estimates by $0.20. At the same time, the company also posted a revenue beat, with a top-line figure that rose 5% from last year to reach $40B — $1.42B better than analysts had predicted.
Meanwhile, JD’s annual active customer accounts grew by 9.2% to 580.8M in the twelve months that ended on June 30. This compared to 531.9M in the previous year.
The results gave the stock an immediate boost. Shares rose 3% after the financial figures were announced and carried momentum into the following sessions.
A further upswing was fueled a couple days later amid reports that the US and China were nearing a deal on the auditing of Chinese stocks listed in the US. JD jumped almost 14% on the news.
Still, the stock has had trouble holding these gains. Uneasiness about putting cash into Chinese stocks has weighed on JD, as investors worry about the ever-changing regulatory environment in Beijing. At the same time, continuing tensions between the United States and China over the status of Taiwan have created another headwind for investing in the region.
All told, shares are about 8% higher since the release of JD’s quarterly results. That said, shares have fallen about 10% for 2022 as a whole.
JD has held up better than many other Chinese tech firms, like Alibaba (BABA) and Tencent Holdings (OTCPK:TCEHY), which have both fallen more than 20% in 2022. However, Baidu (BIDU) has outperformed JD, slipping by just 5%. Meanwhile, Pinduoduo (PDD) has rallied more than 25% since the end of 2021, helped by its own recent earnings report.
Is JD a Buy?
Wall Street has an overwhelmingly bullish view towards JD. Of the 38 analysts surveyed by Seeking Alpha, 29 have given the stock a Strong Buy rating. Another seven have labeled the stock as a Buy. That leaves just two analysts who have tagged the e-commerce firm as a Hold.
With the stock trading just below $60 in Tuesday’s intraday action, market analysts have given the stock an average price target of $83.07 a share. This includes a target as high as $113.73 a share and one as low as $53.75 a share.
Seeking Alpha’s Quant Ratings also present a bullish view of the stock. Breaking down the factor grades, JD receives an A and A- for momentum and profitability, respectively. However, the stock also gets a C+ regarding its growth outlook and a D when viewing the company’s valuation.
Here’s a breakdown:
Seeking Alpha contributor Cavenagh Research is bullish on JD, placing a Buy rating on the stock, as the analyst predicted a wave of earnings upgrades following the latest quarterly update. Meanwhile, Envision Research, another Seeking Alpha contributor, takes a more conservative stance on JD.com, labeling the stock with a Hold, largely due to the risks of investing in China.