JD stock forecast: will US-China tensions bite?

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JD stock forecast remains upbeat, but tensions between US and China could overshadow the firm

The JD.com stock forecast paints the picture of an unstoppable company. Even the lowest analyst estimate for the company’s share price anticipates that we will see gains over the coming 12 months.

Many of the enthusiastic JD stock predictions are linked to the latest set of financial results to come from the Chinese e-commerce giant, covering the third quarter (Q3) of 2021.

Net revenues in the three months ended 30 September 2021 came in at $33.9bn – that is up 25% on where they were a year ago.

There was, however, a net loss of $400m, after registering $1.1bn net income in the same year ago period. Higher expenses for fulfillment (up 23.2% year-on-year), marketing (+42.3%), and general and administrative (+91.1%) and weaker operating income were to blame.

The company saw a 25% rise in annual active customer accounts — those who made at least one purchase during the period — to 552.5 million.

Like its fellow Chinese competitor Alibaba, and the American titan Amazon, JD has been riding a wave of unprecedented demand for e-commerce services. Customers continued spending through the pandemic, but now they want items delivered to their door same day. JD is taking it one step further, with delivery in an hour or less from its partners’ nearest bricks and mortar location.

But, like Amazon, which has a string of profitable ventures including a lucrative cloud computing division, JD has no intention of keeping all of its eggs in one basket. As president Lei Xu explained when Q3 results were released:

“With resilient business operations and core competences in technology and supply chain, JD has built a unique business model, enabling us to have better control across the entire business process. This powerful competitive advantage allows us to navigate through economic cycles and increases our ability to create value as a new type of real economy based enterprise”.

Is JD a good stock to buy?

Like others, JD.com has a dual listing – and this means that it makes an appearance on stock markets in Hong Kong and New York alike. These arrangements have come under scrutiny after the US Securities and Exchange Commission introduced a new law, the Holding Foreign Companies Accountable Act, that means foreign companies are subject to inspection from the Public Company Accounting Oversight Board. US regulators also want to know the names of any board members who are Chinese Communist Party members. Failure to comply could result in trading of JD.com’s shares in the US being suspended.

Beijing did not expect President Joe Biden to carry-on with Donald Trump’s hardline stance with China. Though, Biden prefers to call it “competitive”. Another threat comes in the fact that China has been making a concerted effort to keep its tech giants in check, with new antitrust and privacy rules also managing to put JD.com’s stock price under pressure.

One year ago, JD.com’s stock price on the Nasdaq stood at $95.50. It peaked at $106.88 on 17 February 2021 and ended 2021 at $70.07.  It traded below $65 at the time of writing.

Overall, it does not seem like the company’s performance is the biggest threat to the JD stock forecast. Instead, it is the regulatory uncertainty that arises from the US-China trade tiff and continuing difficulties with the coronavirus pandemic.

Xian, a tech and industry centre in the northwest, officially had more than 1,400 cases in a new outbreak by the end of December. That led officials to lockdown the metropolis of 13 million, leading to more supply chain worries inside and outside China. Not good timing, with the countdown to February’s Beijing Winter Olympics rapidly accelerating.

The longer the lockdown goes, the more trouble for one of JD’s featured new strategies. In September 2021, the company opened its first JD Mall offline store in Xian, with more than 200,000 items from 150 brands, including home, furniture, kids, smart healthcare and auto accessories.

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In the long term, will the JD stock see slower growth in e-commerce?

JD Mall includes a partnership with furniture manufacturer Shangpin Home Collection. Household decor was key in Q3, with more than 20 foreign and domestic brands launching online stores on the JD platform, including Camerich, Lost & Found, QEEBOO, and Lattoflex.

Beauty retailer Sephora also joined JD’s network, including delivery in an hour or less from nearby Sephora bricks and mortar stores.

JD and Dada Group joined forces with more than 150 ASUS stores on JD Daojia and Shop new, the new on-demand consumer retail section of JD.com. That partnership, too, will expand to one-hour delivery.

Overall, analysts appear to believe that there are still many lucrative opportunities that lie ahead for JD.com thanks to the attractive valuations that the current geopolitical climate has delivered.

JD stock: Buy or sell?

Let’s finish up with a look at JD stock price predictions for 2022.

JD chairman and CEO Richard Liu Qiangdong was beaming on 23 December 2021 with news that 17% shareholder Tencent Holdings Ltd planned to distribute 460 million class A shares to its own shareholders, reducing Tencent's stake in JD to 2.3%. A week later, JD expanded its share buyback programme, from $2bn to $3bn by 17 March 2024.

JD.com is a company that is not afraid to diversify – and it has a number of spin-offs. One of them, JD Logistics, launched an East China to London air cargo route. The company says its plan is to deliver products from China’s major manufacturing regions with same day port-to-port to delivery and product arrival within a week. It also formed a partnership with Volvo Cars to supply the mid- and high-end auto aftermarket and cooperate in warehousing and inventory management and store delivery.

By quarter-end, JD Logistics boasted a network of 1,300 warehouses covering a total 23 million square metres of floor area.

According to CNN Business, even the low-end JD.com share price forecast anticipates a 41% rise to $91.37. The median projection anticipates healthy growth to $104.99. And the highest-end estimate predicts that we’ll see a surge to $122.97 – up more than 90%.

Analyst recommendations do not appear to have been swayed by the recent external drama, either. A whopping 39 analysts say JD.com is a buy, while six say it will outperform and three have a hold rating in place. At present, no one believes JD is set to underperform in the coming year, and no sell ratings have been issued.

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Of course, big companies need to invest heavily in order to grow further – and this is something that appears to be making some investors nervous. Looking ahead, one of JD.com’s top priorities centres on ramping up its delivery network, and there are fears that this could put a squeeze on the brand’s net margin.

In early 2021, eMarketer estimated China had become the first market to exceed 50% of all retail spending via e-commerce channels. JD.com might be making an astute decision by keeping its infrastructure in tip-top shape – especially if COVID-19 ends up changing the way we all shop indelibly.

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