JD.com’s [JD] share price has slumped 12% this year (as of 14 May). Most of those losses have come since mid-February, when the stock was trading at circa $106.
Between 19 February — when JD’s share price was trading around $102 — and last week’s close, JD’s share price has fallen 35% to sit at $68.15.
Reasons for the selloff include the ongoing tensions between the US and China, the wider tech selloff and Beijing’s increased scrutiny on tech companies in the region. All of these issues have combined to put a dampener on investor sentiment — not only towards the Chinese e-commerce giant, but to the wider China Tech theme.
Looking at our thematic investment screener, the China Tech theme is down circa 9% over the past month. China tech stocks caught up in the current macroeconomic maelstrom include Baidu [BIDU] (-11%), Alibaba [BABA] (-12%) and Tencent [0700.HK] (-6%). So, will the firm’s upcoming results turn JD.com’s share price around?
When is JD.com reporting Q1 earnings?
How has JD.com been performing?
Last quarter, JD’s earnings soared as the pandemic caused a spike in online shopping. JD.com posted net revenues of RMB224.3bn (US$134.4bn) for the quarter, up 31.4% year-on-year and topping analyst expectations. For the full year 2020, net revenue was RMB745.8bn (US$114.3bn), up 29.3% from the same quarter last year. Annual active customers went from 362 million in 2019 to 471.9 million in 2020, a 30.3% jump.
“During this quarter, JD continued its strategic transformation into a supply chain-based technology and service company with increasingly diversified sources of revenues. With a strong momentum going into 2021 and with our recently optimized organizational structure, JD will continue to invest in innovative, high potential businesses to drive long-term sustainable growth,” said Richard Liu, chairman and CEO of JD.com.
“During this quarter, JD continued its strategic transformation into a supply chain-based technology and service company with increasingly diversified sources of revenues. With a strong momentum going into 2021 and with our recently optimized organizational structure, JD will continue to invest in innovative, high potential businesses to drive long-term sustainable growth” - Richard Liu, chairman and CEO of JD.com
JD worked to cut down delivery times during the pandemic, while also expanding into more price-conscious Chinese cities through its Jingxi platform. This strategy led to 10 million new active customers joining last year, according to Reuters. Investors should watch to see whether JD.com is able to maintain this pace as China comes out of lockdown.
JD Retail is another area to watch, according to investment website Zacks. Big names in the world of fashion — including Stefano Ricci and Vivienne Westwood — have all launched flagship stores on JD.com, potentially driving up sales in the reported quarter. In its fourth-quarter results presentation, JD.com highlighted JD Retail as one of its margin drivers as it looked to improve profitability.
Any word on the success — or otherwise — of newly-listed spin-off JD Health and the progress of JD Logistics’ initial public offering application to list in Hong Kong will also be closely watched. JD Logistics is targeting $3.5bn in what could be one of the biggest listings this year in the city, with SoftBank Vision Fund and Temasek Holdings among the investors, according to a Bloomberg report.
What to expect from JD.com’s share price
Analysts expect JD to post earnings of $0.35 a share, up from the $0.28 seen in the same quarter last year. Revenue is forecast at $29.72bn, a 42.2% jump on the $20.91bn seen last year.
Can JD beat analyst expectations? In the past four quarters, JD has managed to beat expectations, it was a close run thing last quarter, with JD posting earnings of $0.23 against a forecasted $0.19.
JD's forecasted Q1 revenue - a 42.2% YoY rise
Among the analysts tracking the stock on Yahoo Finance, JD.com’s share price carries an average $107.39 target — a 57% upside from 14 May’s closing price. Both Stifel and HSBC have maintained their buy ratings on JD in recent months.
Stifel trimmed its price target, going from $105 to $95 (which still represents a 39.4% upside on 14 May’s closing price). HSBC went the other way, bumping its price target from $103 to $108 — a 58.5% upside.