Shares of JD.com (JD) slumped about 10% in after-hours trading yesterday on news that American retailer Walmart (WMT) is planning to sell its stake to raise $3.74 billion. According to Bloomberg, Walmart is reportedly offering 144.5 million of JD’s ADRs (American Depositary Receipts) at a price range of $24.85 to $25.85 apiece. Morgan Stanley (MS) is the broker-dealer for the offering.
As of writing, JD’s Hong Kong-listed shares (HK:9618) declined more than 10% on Wednesday in reaction to the news.
Walmart’s Surprise Stake Sale
Walmart said that it is determined to continue its commercial relationship with JD.com. However, the company believes that this stake sale will help it focus on the Chinese operations of Walmart China and Sam’s Club and direct the funds to other important areas.
China’s retail market is facing a slew of challenges, including an uncertain economic outlook, shifting consumer preferences, and strong competition. Given this backdrop, Walmart seeks to strengthen its own offerings in the world’s largest consumer market.
Walmart is the largest shareholder in JD.com. Its stake sale comes after an eight-year-long partnership. In June 2016, Walmart took a 5% stake in JD by selling its Chinese online grocery store, Yihaodian. According to JD.com’s 2023 annual report, Walmart had a 9.4% stake in the company and owned roughly 289 million shares.
Is Walmart Stock a Buy or Hold?
Analysts are highly optimistic about WMT stock’s trajectory. On TipRanks, WMT has a Strong Buy consensus rating based on 27 Buys and three Hold recommendations. The average Walmart price target of $74.11 implies that shares are almost fully valued at current levels. Walmart stock has gained 42.8% so far this year.
Is JD a Buy or Hold?
Despite the current headwinds, JD stock also commands a Strong Buy consensus rating on TipRanks. This consensus rating is based on 14 Buys versus two Hold recommendations. The average JD.com price target of $39.56 implies 40.3% upside potential from current levels.
