The JD.com train is getting ready to leave the station again

Key Points

• JD.com is the largest e-commerce and internet company in China by revenue.
• Unlike Pinduoduo, JD.com has a strict zero-tolerance counterfeit policy and a reputation for higher quality products and partnerships with designer brands like Louis Vuitton.
• JD.com saw Q3 2023 revenues grow only 1.7% YoY, but EPS grew 12% YoY as it maintains a quality-over-quantity operating model.

JD.com Inc. NASDAQ: JD is often cited as the Amazon.com Inc. NASDAQ: AMZN of China. This comparison applies due to its sheer massive scale, as it has grown to be the largest e-commerce and B2C retailer in the country. While JD.com is a member of the Retail/Wholesale sector, it is comprised of many different business segments, including JD Retail, JD Logistics, JD Technology and JD Health. Its fulfillment network covers 99% of China's population.

The company also prides itself on having a zero-tolerance policy for counterfeits and implements enhanced authentication services called JD Smart Check for imported goods. Outpacing Alibaba Group Holding Ltd. NASDAQ: BABA, JD.com is also the largest internet company by revenue in China, serving over 600 million consumers. It was named to FORTUNE's China's Most Admired Companies 2023 List.

Quality versus knock-offs

Unlike PDD Holdings Inc. NYSE: PDD, operator of Pinduoduo, which is known for its super cheap and super low-quality knock-off products, JD.com carries higher quality merchandise. It has a much better reputation amongst consumers seeking authentic designer brands. The slowdown in consumer spending has caused its revenues to grow at a snail's pace, but at a much better quality as the company still grew its net income 12% YoY.

It offers Shop Now 1-hour delivery in addition to same-day and next-day delivery services. The retail division offers everything from groceries to electronics, computers, cosmetics, fashion apparel, luxury brands, household items and appliances, and baby and pet supplies. Check out the sector heatmap on MarketBeat.

JD Logistics

Its logistics division is the largest in the country. JD.com stores products in over 1,600 warehouses comprised of 32 million square meters managed by its modularized smart supply chain management solution, which utilizes big data, blockchain, internet-of-things (IoT), artificial intelligence (AI) and machine learning. It's the only e-commerce platform in the world to provide cross-border, small-to-medium-sized warehousing, cold chain delivery, frozen and chilled warehousing facilities, B2B and crowdsourcing logistics.

It's able to achieve 90% of orders delivered on the same day or the next day. It has also constructed the world's first fully automated warehouse in Shanghai and developed drone and automatic delivery robots.

Quality revenues and earnings

JD.com reported its fiscal Q3 2023 earnings of RMB6.70 per share, beating consensus analyst estimates by RMB83 cents or 11 cents. Operating income was RMB9.3 billion ($1.3 billion), compared to RMB8.7 billion in the year-ago period. Non-GAAP income was RMB11.1 billion ($1.5 billion) compared to RMB9.9 billion in the year-ago period. Operating profit margins were 4.5%.

Revenues squeaked higher by 1.7% YoY to RMB247.7 billion ($34 billion), beating consensus analyst estimates by $60 million. Operating cash flow on a trailing twelve-month basis was RMB58.4 billion ($8 billion), compared to RMB45.8 billion in the year-ago period. The company has $32 billion in cash.

CEO and CFO comments

JD.com CEO Lei Xu commented, “We reported steady top-line performance for the quarter with record profitability driven by our proactive efforts on enhancing price competitiveness and platform ecosystem, as well as our supply chain advantages.”

JD.com CFO Ian Su Shan added, “JD’s record profitability for the quarter and healthy cash flow reflects our successful business evolvement and supply chain strengths. We also see our core categories of home appliances and electronics continue to expand market share. At the same time, general merchandise gradually ramped up momentum in the quarter, as we relentlessly focus on user experience.”

JD.com analyst ratings and price targets are at MarketBeat. JD.com peers and competitor stocks can be found with the MarketBeat stock screener.

 Daily symmetrical triangle breakout attempt

The daily candlestick chart for JD illustrates a daily symmetrical triangle breakout attempt. The lower ascending trendline formed after bottoming at $24.01 on October 23, 2023. JD formed a daily market structure low (MSL) breakout through the $26.03 trigger, making higher lows.

The upper descending trendline contained the rallies to lower highs until November 24, 2023, as shares attempt a breakout powered by the rising relative strength index (RSI) at the 60-band. Pullback support levels are at $26.99, $26.03 daily MSL trigger, $24.01 and $22.14.