Like other U.S.-listed stocks of China-based companies, there’s been plenty of downward pressure on JD.com Inc. (JD). After anti-monopoly fines were thrown at DiDi Global (DIDI) and Tencent Holdings (TCEHY) by the Chinese government in July, shares of similar ecommerce plays have been negatively affected.
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So far, JD.com has avoided any direct impact from this “China crackdown.” Whether this continues to be the case or not is anyone’s guess, but investor uncertainty will persist into the near future. That will happen even if the company beats expectations when it releases quarterly earnings later this August.
Since the acceleration of China’s regulatory scrutiny in early July, shares have pulled back from $77.44 per share, to $71.73 per share as of Monday’s closing. (See JD.com stock charts on TipRanks)
Some may see now as a good time to buy, because fear, uncertainty, and doubt about the company’s future remain high. However, it could take time for investor enthusiasm to return.
The China Regulatory Crackdown and its Possible Impact on JD Stock
JD.com has faced issues with Chinese regulators before. Twice in the past five years, it’s been fined relatively small amounts for infractions related to advertising and pricing. Is there anything in particular that suggests it’s next in line to face severe penalties?
At this point, it’s hard to tell. If the Chinese government remains focused on going after market leaders for infractions, JD may be able to avoid getting caught in the crosshairs. It may be one of the world’s largest ecommerce companies, yet it trails significantly behind Alibaba (BABA) in terms of market share.
On the other hand, if China continues to flex its regulatory muscles, it may soon set its sights on other large companies under its jurisdiction that have U.S. stock market listings.
That’s why investors have gotten skittish about names in this space. Chances are, that attitude will persist. If that is indeed the case, a rebound to JD.com’s pre-crackdown prices — much less its past high ($108.29 per share, set earlier this year) — isn’t going to happen anytime soon.
Why Investors May Continue to Stay Away
If its last quarterly report is any indication, the ecommerce company could again deliver revenue and earnings results that exceed analyst consensus.
Still, as the “crackdown” headwinds continue, this is not expected to shift much to investor sentiment when it comes to this stock. Not only have retail investors pivoted away from China-based stocks, but institutional investors have been bailing as well.
What Analysts are Saying About JD Stock
According to TipRanks, JD stock has a consensus rating of Strong Buy. Out of 12 analyst ratings, 10 are Buys, one is a Hold, and one is a Sell.
The average JD stock price target is $95.67 per share, implying around 33.4% upside from today’s prices. Analyst price targets range from a low of $62 per share, to a high of $130 per share.
Bottom Line: JD.com Comeback may Take Time, Despite Strong Earnings
A few months down the road, JD.com could find itself under direct scrutiny from Chinese regulators. Not only that, given that it has a secondary listing in Hong Kong, the company may eventually choose to de-list in the United States.
Investors, fearing the situation is more likely to get worse, have shied away from JD stock. Even if results come in strong later this month, we cannot expect this opinion to change in the near-term.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
