JD Stock: Gaining from the Rise of Consumer Class

JD StockJD.Com Stock Builds on its Strengths

Today’s stock represents another of our favourite investment strategies – investing in stocks that gain from the rise of China’s middle class and rising consumerism. As the country’s middle class becomes more tech savvy and has access to more disposable income, businesses that benefit from this development shall be the ones that return above average gains to the investors.

The case in point being JD.Com Inc (ADR) (NASDAQ: JD), which is the largest e-commerce company in China as well as the largest Chinese retailer, in terms of revenue, in 2016. The company aims to provide an enjoyable online retail experience through its user-friendly and content-rich website as well as mobile apps. JD offers a broad selection of authentic products at competitive prices which are delivered with speed and reliability through its large infrastructure. The company operates more than 250 warehouses across China and has one of the biggest fulfilment infrastructure of any e-commerce company in China.

JD.com has established strong relationships with its suppliers as it develops its online direct sales business. Leveraging its strengths, the ecommerce giant also launched its online marketplace business in 2010, which allowed it to significantly expand its selection of products and services. JD stock has been going up as it gains from the shift in preferences of the middle-class consumers in China, who are flocking to online platforms that provide them with more value for their money.

A recent research report from eMarketer pegs China as the world’s largest e-commerce market which is set for continued growth in 2017. Retail ecommerce sales are expected to reach $1.13 trillion this year, a figure equal to 23.1% of total retail sales. Growth is expected to continue, with ecommerce accounting for 40.8% of all retail sales in China by 2021. Moreover, the updated forecast sees mobile driving ecommerce in China. (Source: New eMarketer Forecast Sees Mobile Driving Retail Ecommerce in China, eMarketer, July 5, 2017)

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JD.com is preparing itself to capitalize on the new developments and take on the competition. This week, Tencent and JD.com made the announcement of entering into definitive agreement with Vipshop and investing about $863 million into e-commerce firm Vipshop, which is a leading online discount retailer for brands in China. (Source: Tencent, JD.com and Vipshop Announce Equity Investment and Business Cooperation, JD.com Inc, December 18, 2017)

Richard Liu, the CEO of JD.com, said that the strength of Vipshop’s flash sale and apparel businesses, together with its outstanding management team, created strong synergies with JD.com. This is an attempt to bring more female shoppers on to its platform and to expand the breadth and reach of the company’s fashion business.

As the average Chinese consumer becomes more tech savvy and more exposed to foreign brands, with more willingness to spend money, the business of the company shall keep on growing and boosting JD stock higher.

This is also evident from the recent quarterly results posted by the company.  JD.com announced impressive third quarter results last month, which were good news for JD stock. The net revenue from continuing operations grew 39.2%. The revenues from services and others increased 46% year-over-year.  With over 260 million active customers that comprise very valuable middle-class and upper middle-class consumers, JD.com has lot of upside potential in the coming years.

JD.com has the key competitive advantages of a huge logistics network and supple chain resources. By the end of the year, the company would be covering 100% of the provinces and counties, with ability to reach even the rural areas in China.

Given the continuous growth in the company’s business, the stock has gained more than 100% in the last 5 years and about 65% in the last one year itself.

jd stock nasdaq chart

Chart courtesy of www.stockcharts.com

Analyst Take – The strong economic growth in China has produced a growing middle class, which is comfortable with mobile and social commerce. JD stock is a strong play on this rising ecommerce trend in China.

With strong focus on growing this business, JD.com has great potential ahead. The company thrives to offer consumers the best online shopping experience, through its user-friendly website and native mobile apps. The ecommerce giant continues to add strategic partners to complement its core strengths and fulfil their every shopping need.

JD.com has built a great platform for the brands and the merchants. Robust growth in China retail with increasing online penetration, bodes well for the future of JD.com. Investors should take note of this retail star in China universe and consider JD stock.