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Buy The Dip In JD.com Stock

Mar. 05, 2018 7:52 AM ETJD.com, Inc. (JD)11 Comments
L&F Capital Management profile picture
L&F Capital Management


  • JD stock is dropping after the company missed fourth quarter earnings estimates.
  • Revenue growth remains robust.
  • Near-term margin headwinds are all growth investment related.
  • This weakness is an opportunity for long-term oriented shareholders.

JD.Com (NASDAQ:JD) is dropping big after the Chinese e-commerce giant reported fourth quarter earnings that slightly missed expectations. We believe the sell-off is a buying opportunity. When it comes to a company like JD that is growing revenues at a 30-40% clip, we believe sustained high revenue growth is more important in the near-term than margin expansion. Consequently, a slight earnings miss on still-robust revenue growth doesn't mean much to us. Regardless of near-term margin trends, we think this is still a secular growth stock with promising upside potential in a long-term window as global expansion efforts play out.

As China's second largest digital commerce player, JD has been a pure-play on the booming China consumerism narrative. This narrative is quite simple. There are a ton of people in China, and a majority of those people are starting to urbanize, earn more, and spend more. Naturally, this leads to an explosion in Chinese retail, and specifically, to an explosion in Chinese digital retail. This is where JD operates and dominates, and therefore, the company has morphed into a winning investment for the past several years as China's consumer class has boomed.

But the exciting thing about JD is that the company is becoming much-more than just a pure-play on China's booming middle class. The company is aggressively pushing into international e-retail markets, specifically Europe, in hopes of connecting China's burgeoning consumer class with goods and products from across the world, and vice versa. By 2019, JD expects to sell roughly $2.4 billion worth of French merchandise alone. That is a sizable revenue bump from just one country. If JD can replicate that success at large across Europe, you could easily be talking about another $10-20 billion (France is only 15% of

This article was written by

L&F Capital Management profile picture
L&F Capital Management, LLC, is a quantitative investment management group located in San Diego, California. Our multi-strategy investment approach comprises a mix of event-driven trades and long-term value investments, utilized together to maximize profit in both short and long term scenarios. We maintain consistency in portfolio mix through our long-term value holdings, but stress flexibility in portfolio mix from our daily event-driven trades. We believe this mix of flexibility and value generates both short and long term profits while reducing exposure to market volatility. L&F also shares various trade and investment opportunities through Seeking Alpha. For more information, visit www.lfcapitalmanagement.com.

Analyst’s Disclosure: I am/we are long JD, AMZN, NFLX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (11)

Think poor results will continue for at least another quarter or two. Am long term buyer and holder of JD but will sell half of my holdings today. Believe it can be bought back later at lower price. You didn't mention the possibility of a market correction? If one happens, whether in the U.S. or China, most of our big winners will drop as well.
Great article and long term story here. Hoping to see the mid 30s again on market volatility. Want to double my position around 35.
kos47 profile picture
As a DGI investor, JD is the only non-paying dividend stock I own.
Missed my chances to buy Amazon at the “right time” buying JD, hope to see the same level of success as Amazon did.
05 Mar. 2018
I agree with your upbeat assessment. I'm long at $38 with covered calls (June 45s). Hope to buy these back soon at or below 20 cents on the dollar (in an IRA that charges an annual fee but no commissions). Looking to buy more JD around $40. Good luck to the longs!
Agree with article and the comments made. Nice to read something that makes a point that it this company is an "investment" and for the "long term." This morning looks like a further small dip and I am watching for another add to my position. The selloff was a headline reaction but if you read the call, there was much more good to anything"bad."
Millennial Investor profile picture
agreed, this is not a quarter by quarter company. If you are selling based on one quarter that wasnt even that bad, JD was never the right investment for you anyway.
g.dimit profile picture
JD Is very Dynamic, Aggressive and well received by their Costumers Company.

Buy in dips and accumulate positions.

JD Must try to Avoid to take BABA Head on in some areas.
also long jd. what surprised me was that they added more than 26 million customers in this past quarter. i am a bit concerned about their recent expansion efforts. they are investing a lot in china and parts of SE Asia and still investing. would have preferred them to focus on these areas which have great potential in ecommerce before expanding to us and europe. they might be stretching themselves to thin IMO
Maybeimright profile picture
Did you see the margin guidance for FY18? Richard mentioned it on the call.

Also long JD, AMZN, NFLX. Unfortunately in that order size.
Great article, thank you, very good points made, JD is a stock to own long-term.
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