Shares of JD.com (JD) were on an upswing in trading on Tuesday after the company announced a substantial stock buyback. Specifically, the Chinese e-commerce company revealed that its board has approved a $5 billion share repurchase program, including the repurchase of its American Depository Shares (ADSs).
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Details of JD’s Stock Buyback
In more detail, this stock buyback is set to take effect in September and will allow the company to buy back its stock over the next 36 months, through the end of August 2027. JD.com intends to repurchase stock periodically through open market purchases, privately negotiated transactions, block trades, or other legal methods, depending on market conditions and applicable regulations.
This latest buyback comes on the back of JD.com’s strong performance in the June quarter, where it surpassed profit forecasts. Furthermore, this is JD.com’s second buyback initiative this year, as earlier in March, the company announced a $3 billion repurchase plan.
Why Is JD.com Doing Stock Buybacks?
Turning to the reasons behind these buybacks, the backdrop for the Chinese company’s aggressive strategy is a challenging macroeconomic environment in China. Chinese consumers have become increasingly cautious with their spending due to the economic slowdown, a prolonged property market slump, and concerns over job security. In response, JD.com has been offering frequent discounts and promotions to stimulate demand.
Adding to this uncertainty, earlier this month, Walmart (WMT) sold its entire $3.7 billion stake in JD.com, ending an eight-year investment.
Is JD a Good Stock to Buy?
Analysts remain bullish about JD stock, with a Strong Buy consensus rating based on 10 Buys and three Holds. Over the past year, JD.com has declined by more than 15%, and the average JD price target of $38.58 implies an upside potential of 45.7% from current levels.
