Chinese stocks have been under pressure lately as the Chinese regulators crack down on different industries, ranging from education to gaming. To add to this, besides for the the Evergrande (EGRNF) crisis, industries in China are also suffering from power cuts as China grapples with a coal shortage. The shortage adversely impacts the Chinese manufacturing sector.

JD.com (JD) is a Chinese e-commerce platform that reports primarily under three business segments: Retail, Logistics, and New Businesses. The stock has also felt the heat from investors, and has tanked 10.7% in the past month.

In the second quarter, JD posted revenues of $39.3 billion, up by 26.2% year-on-year and surpassing analysts’ estimates of $38.51 billion. Adjusted diluted net income per American Depository Share (ADS) came in at $0.45, ahead of analysts’ expectations of $0.36.

The company’s annual active customer accounts went up by 27.4% year-over-year to 531.9 million in the last twelve months, ending on June 30. (See JD.com stock chart on TipRanks)

Earlier this month, Mizuho Securities analyst James Lee came away bullish on the stock after a conversation with the company’s management. The analyst rated the stock a Buy, and reiterated a price target of $85 (18.7% upside) on the stock.

Lee expects that JD’s Q3 results will “remain on track with revenue guidance of JD Retail at low-to-mid 20% YoY growth despite facing some headwinds.” According to the analyst, these headwinds include slower consumption growth, especially in the Electronics category in July and August, and tough comparables for the retail industry.

JD’s Retail segment made up 91.7% of the company’s total revenues, with revenues of $36.01 billion in Q2.

The analyst discussed some key points with JD.com management. One of these was China’s new Personal Information Protection Law (PIPL), which was passed in August this year. This law aims to define personal information and strives to regulate the transfer, processing, and storage of personal information.

The analyst was of the view that China’s new PIPL law will have a limited impact on the stock. It is because Lee believes that “the policy is similar to GDPR [General Data Protection Regulation] in Europe in 2018, as it requires an explicit consent from users for tracking.”

Lee also stated that the impact of the GDPR “was limited due to the low opt-out rate. Similarly, the new rules on recommendation algorithm are vague, but appear to be focusing on online entertainment.”

Analyst Lee is also positive as the company aims to become an omnichannel retailer. It is strengthening its supply chain management and logistics, and leveraging its integrated marketing capabilities, to be able to serve its consumers anywhere and anytime.

In a move towards achieving this, according to Lee, the company “increased its integration with on-demand delivery platform JDDJ (DADA) to offer consumers online and offline inventory at scale.”

The analyst views this as “strategically positive as selections from local retail stores increase delivery speed, optimize delivery costs, and supplement online inventory shortage to improve conversions.”

Turning to the rest of the Street, Wall Street analysts are bullish about JD.com, with a Strong Buy consensus rating, based on 11 Buys and 1 Sell.

I remain neutral about the stock.

The average JD.com price target of $97.67 implies 36.4% upside potential from current levels.

Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article​.

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The post JD.com: Expanding from Online to Omnichannel appeared first on TipRanks Financial Blog.

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By: Shrilekha Pethe
Title: JD.com: Expanding from Online to Omnichannel
Sourced From: blog.tipranks.com/jd-com-expanding-from-online-to-omnichannel/
Published Date: Thu, 30 Sep 2021 10:31:49 +0000

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