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Our Analysis Suggests JD.com Might Go From $100 to $300 in 2-3 Years

Stock (Symbol)

JD.COM (JD)

Stock Price

$88

Sector
Retail & Travel
Data is as of
January 18, 2020
Expected to Report
March 1
Company Description
JD.com, Inc. is an online direct sales company. The Company engages in the sale of electronics and home appliance products and general merchandise products (including audio, video products and books) sourced from manufacturers, distributors and publishers in China on the Internet through its Website, www.jd.com. It also offers an online marketplace that enables third-party sellers to sell their products to customers on the Company’s Website. Source: Thomson Financial
Sharek’s Take
David SharekChina’s JD.com (JD) is breaking out to a new All-Time high today as profits are soaring. During the last two qtrs, JD’s profit growth has been 58% and 83%. Estimates are for 175% growth next qtr, so this stock certainly fits our mold of owning stocks with rising profits. The company is expected to have profits climb from $1.02 to $4.77 between 2019 and 2023. So with the stock still under $100 a share, JD seems to have huge upside.

JD, China’s largest e-commerce company by revenue, has more than 800 warehouses throughout the country with its own nationwide fulfillment infrastructure, and last-minute delivery networks staffed with its own employees. The company did $67 billion in revenue in Fiscal 2019, and if it was an American company that would put it 10th in the U.S. of largest retailers, behind Target and Lowe’s. Like Amazon, JD has embraced technological advances in logistics. In October 2017 it introduced its first unmanned warehouse without any human monitoring in Shanghai, with AI and visual learning robots. During the 1st half of 2020, fresh produce (within the General Merchandise category) became the largest product category for the company. Supermarket order volume growth was 48% last qtr. Popular food items include cooking oil, rice and flour. Here’s a breakdown of last qtr revenue by segment:

  • Electronics and Home Appliance: 53% of total revenue, 22% revenue growth.
  • General Merchandise: 33% of company revenue, 35% growth year-over-year.
  • Marketplace and Advertising: 7% of JD revenue with 24% growth.
  • Logistics and Other Services: 6% of revenue, 73% growth yoy.

JD stock looks to be in the midst of a big-move higher on the profit front. Analysts estimate profits of jumping from $1.02 a year ago to $1.63 in 2020, $2.27 in 2021, $3.21 in 2022 and $4.77 by 2023. That’s big. Then the next question is: when should we be thinking about $10 in profits? Ten dollars is a big number. The stock has an Est. LTG of 46% a year which is fantastic, and a reasonable P/E of 39. I think this stock is a deal. JD is a top holding in the Growth Portfolio and Aggressive Growth Portfolio. JD Health gives the company an additional catalyst. In August, JD Health launched its JD Family Doctor, a telehealth service for families with 24/7 online consultations, medical consultations with experts, and even face-to-face appointments. 

One Year Chart
These charts and tables were done last week when the stock was $88. Today, JD is trying to break out to a new All-Time high and is currently $98. I don’t mind investors paying a little more for this stock. The upside is so good.

Note JD had profits decline in 2018. This was due to increased spending for logistics. JD Logistics opened its service to third-parties in 2017, and the division made its first profit in 2020.

Profit growth was poor 3-4 qtrs ago due to COVID-19. That was the January – March qtr when China was dealing with closures due to COVID-19. Now profit growth is back — and is accelerating.

With a P/E of only 39 I think the stock’s got huge upside. The Est. LTG of 46% a year is fantastic, and that number is up from 43% last qtr.

Earnings Table
Last qtr, JD reported a profit growth of 83% and whipped estimates of 38%. Revenue increased 29%. Gross profit margin increased to 8.7%, up from 8.4% last year, mainly driven by margin improvement in JD Retail and JD Logistics. Last qtr, annual active customers rose to 442 million, up 32% from a year-ago.

Annual Profit Estimates increased slightly this qtr. Here’s how all annual estimates look:

2020 $1.63
2021 $2.27
2022 $3.21
2023 $4.77

Qtrly profit Estimates are 175%, 82%, 21% and 21%. Note the company has beaten the street in a big way the past three qtrs.

Fair Value
My Fair Value P/E gets reduced from 75 to 65 this qtr because Annual Profit Estimates didn’t increase much this qtr. 

There’s huge upside in this stock. If JD does make $4.77 in 2023 and gets a 65 P/E it would be a $310 stock — a triple from here —  in just 2-3 years.

Bottom Line
JD.com’s management is determined to be the dominant force in e-commerce, and was spending what it takes to get there. But now it seems like those investments are paying off.

This stock has Amazon-like potential.

JD stays at 4th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. I added to my JD position last qtr.

Power Rankings
Growth Stock Portfolio

4 of 55

Aggressive Growth Portfolio

4 of 22

Conservative Stock Portfolio

N/A

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