JD.com’s Record Net Profit Underscores Its Financial Strength

Key Points

• JD.com is China’s largest online retailer and logistics operator, often called the Amazon.com of China.
• JD.com reported Q2 2024 revenue growth of just 1.2%, but non-GAAP net income rose 69% YoY to a record $2 billion.
• JD.com's automated robot-operated warehouses can fulfill up to 200,000 orders a day, replacing 400 to 500 workers with just five human operators.

Chinese eCommerce giant JD.com Inc. NASDAQ: JD shares rallied 12% following a solid Q2 2024 earnings report. As the largest online retailer in China, the company serves over 600 million customers. Top-line growth has slowed, but the company posted record net profits in the quarter as it continues to refine its operations. JD.com is often referred to as the Amazon.com Inc. NASDAQ: AMZN of China due to its diversified businesses that reach beyond just eCommerce.

JD.com operates in the computer and technology sector and competes with e-commerce companies like Alibaba Group Holding Ltd. NYSE: BABA, PDD Holdings Inc. NASDAQ: PDD, and Amazon.com.

JD.com Operates 3 Primary Segments

Like Amazon.com, JD.com has diversified businesses beyond its online store. The three primary segments are JD Retail, JD Logistics, and New Businesses.

JD Retail: Quality and Authenticity Guaranteed

JD Retail operates an online marketplace where it sells authentic products ranging from electronics, computers, cosmetics, fashion, and luxury brand products to consumers.

While Chinese online retail sites like Alibaba.com, Pinduoduo.com, and TEMU.com are known for having low prices, they are also notorious for questionable quality and carrying fake or counterfeit products. JD.com differentiates itself by placing an extremely high emphasis on quality and authenticity.

JD.com has a zero-tolerance policy regarding counterfeit products on its site. All products are sourced directly from reputable merchants and global brands. The company has a one-strike policy that not only permanently bans merchants selling counterfeit products but also imposes financial penalties. More than 90% of the orders are placed through its mobile app.

The JD Retail division also includes two sub-segments: 

JD Health is a virtual pharmacy that has partnered with pharmaceutical companies to debut new and specialty drugs online. Some of the pharma companies include French giant Sanofi (SFY), GeneScience, and Sinqi Pharmaceuticals.

JD Industrials services industrial clients with the digital transformation of industrial supply chains from product selection and procurement to operations and fulfillment. Services are provided to help industrial clients achieve compliance, maintain stable inventory, implement cost reduction, and attain operational efficiency.

JD Logistics: Supply Chain, Warehousing and Delivery Services

Its logistics division operates a network of over 1,600 warehouses comprised of 32 million square meters and 350,000 in-house delivery personnel. It's the largest logistics operation in China, with the capability to deliver 90% of its orders on the same or the next day.

Its Shop-Now option enables one-hour deliveries. It handles logistic services not only for JD.com but also for many global businesses. Its JD NOW instant shopping offers premium products, including fresh produce, flowers, cakes, groceries, and beverages from over 500,000 physical stores, delivered in as fast as nine minutes to customers across 2,300 counties and cities in China.

Many of its warehouses are fully automated. JD has been constructing fully automated warehouses since 2018. Its first fully automated warehouse was launched in Shanghai, China, in a 40,000-square-meter facility that would normally use 400 to 500 workers but is only operated by five workers. The machines can automatically process 200,000 orders a day. The company opened an automated warehouse in California to challenge Amazon.

JD.com's New Businesses: Expanding into Technology and Property

JD.com's New Businesses segment includes Dada, JD Property, Jinxi, and its overseas businesses.

JD Technology provides cloud computing, artificial intelligence (AI), big data, and internet-of-things (IoT) services and solutions to enterprises.

JD Property owns and operates a variety of facilities. It offers comprehensive solutions for infrastructure development and operations across multiple sectors. JD’s portfolio of properties includes standard and automated modern warehouses, smart industrial parks, photovoltaic new energy infrastructure, data centers, and various other innovative facilities.

Its overseas businesses include JD Logistics International, JD Industrials International, JD Property International, and Ochama, its European one-stop shop for top-rated quality products available to be delivered or picked up at hundreds of designated pick-up points.

JD Stock Reverses a Head and Shoulders Breakdown

The daily candlestick chart for JD initially triggered a head and shoulders breakdown pattern when it fell under the $25.90 neckline. However, shares were able to rally off the $24.13 lows back to the neckline into the Q2 2024 earnings report. Strong results surged shares back above the neckline through its right shoulder peak at $29.07. The daily relative strength index (RSI) surged to the 70-band. Pullback support levels are at $27.39, $26.35, $25.57, and $24.13.

JD's Stellar Q2 2024 Earnings Report

JD.com reported second-quarter 2024 EPS of $1.41, beating consensus estimates by 44 cents. Revenues rose 1.2% YoY to $40.1 billion. Non-GAAP net income rose 69% to $2 billion. Non-GAAP EBITDA rose 30% to $1.9 billion. Net margin improved to 5%, up from 3% in the year-ago quarter. The company bought back $2.6 billion of its $3 billion stock buyback authorization approved in March 2024. JD.com had $28.8 billion in cash and cash equivalents at the end of the quarter.

Cirrus Logic CEO Sandy Xu commented, “Our steadfast efforts to strengthen supply chain capabilities and user experience continue to distinguish JD in China's e-commerce industry, as we leverage our growing economies of scale and procurement efficiencies to bring users everyday low prices without sacrificing quality.”  

JD.com analyst ratings and price targets are at MarketBeat. There are 14 analyst ratings on JD stock, comprised of 10 Buys and four Holds. Consensus analyst price targets point to a 26% upside at $36.93. JD pays a 2.53% annual dividend yield and trades at 9.3x forward earnings compared to Ali Baba at 11.95x and Pinduoduo at 13.08x.