JD.com
Stock Market Analysis

Could JD.com’s share price rise 650% on Q2 earnings?

JD.com’s share price has soared in 2020, reaching an all-time high in July. What can investors expect when the company announces its latest earnings report?

This article was originally published on Opto – Understand What Really Moves Markets.

JD.com’s [JD] share price has reached new heights this year. The Chinese e-commerce giant’s Nasdaq-listed stock hit an intraday high of $69.18 on the 9 July, closing at $67.36 — representing an increase of 91.2% year-to-date.

This came just two-and-a-half weeks after JD.com, which has been listed on the Nasdaq since 2014, completed its second listing on the Hong Kong stock exchange [HKG: 9618]. On its first day of trading in Hong Kong on 18 June, JD.com’s share price grew by 3.5% from its IPO offering of HK$226 to HK$234.

As of 12 August’s close, JD.com’s share price sat at $62.41, but analysts are incredibly bullish on the stock’s outlook.

Will JD.com’s share price continue to soar after it releases its second-quarter earnings report on 17 August?

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How has JD.com been performing? 

The coronavirus outbreak has given e-commerce companies in China a boost, as consumers opt for online shopping rather than visiting physical stores. Because of this, JD.com’s share price has been thriving so far this year, despite mid-March’s wider market sell-off.

This was clearly shown when the company announced its Q1 earnings on 15 May, with earnings of $0.21 per share beating consensus estimates of -$0.13. This marked JD.com’s fourth consecutive quarter surpassing the consensus EPS estimates.

For the quarter ended 31 March, the Beijing company reported net revenue of $20.65bn, an increase of 14.7% compared to the $18bn made in the same quarter in 2019. If it can maintain a similar level of improvement in Q2 earnings, JD.com’s share price could be set to skyrocket.

“We are proud that JD.com has been able to remain fully operational throughout the COVID-19 outbreak,” said Richard Liu, Chairman and CEO, in a statement released alongside the Q1 results. “Strong user growth during the first quarter reflects consumers’ increasing reliance on JD.com to support every aspect of their lives, and confidence in our commitment to providing a broad selection of quality products and best-in-class services.”

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Looking ahead, Q2 guidance included in the Q1 earnings report showed the company projects its net revenue to grow 20-30% year-on-year. This is in line with consensus estimates by Zacks Equity Research which projects quarterly revenue to hit $27.19bn, representing an increase of 24.21% from the same period last year.

Moreover, analysts at Zacks expect JD.com to report earnings of $0.39 per share, representing growth of 18.18% year-on-year. In the 30 days to 3 August, the consensus saw an upward revision of 2.6%.

Looking ahead, Q2 guidance included in the Q1 earnings report showed the company projects its net revenue to grow 20-30% year-on-year. This is in line with consensus estimates by Zacks Equity Research which projects quarterly revenue to hit $27.19bn, representing an increase of 24.21% from the same period last year.

Moreover, analysts at Zacks expect JD.com to report earnings of $0.39 per share, representing growth of 18.18% year-on-year. In the 30 days to 3 August, the consensus saw an upward revision of 2.6%.

For the full year, the publication reported a consensus estimate for earnings of $1.25 per share and revenue of $101.35bn. If correct, the results would show growth of 20.2% and 21.7% year-on-year, respectively, and would almost certainly see JD.com’s share price grow.

Does JD.com’s share price make it a buy? 

“JD.com hit the Nasdaq in 2014 and is up over 200% since then,” Zacks said. “The stock saw initial success, but it really started to take off in the fourth quarter of 2018 and is now up 200% since January 2019, which crushed AMZN’s 100% run and BABA’s 85% climb during this stretch.”

As well as a Buy rating from Zacks, the consensus among 46 analysts polled by CNN Money is also to Buy. This rating is held by a strong majority of 36, with three giving JD.com’s shares an Outperform rating. That said, six analysts suggest Holding the stock, while one sees it as a Sell. 

Among the 44 analysts offering 12-month forecasts for JD.com’s share price, CNN Money reports a median target of $483.33, with a high estimate of $596.59 and a low of $220.14. The median estimate represents a 674.44% increase on JD.com’s share price through 12 August’s close.

“Like Amazon, JD.com aims to touch nearly every aspect of life in China. And investors should remember that the growing Chinese middle-class should help the firm grow for years to come. McKinsey estimates that China’s middle class could hit 550 million by 2022, which is far larger than the entire US population of roughly 330 million,” Zacks concluded.

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