Why JD.com shares are bucking the Chinese tech stock trend
JD.com shares (NASDAQ: JD) are emerging as some of the most resilient in the Chinese tech space, with the company’s earnings for the third quarter of 2021 markedly surpassing those of key peers including Alibaba Group (NYSE: BABA) and Vipshop Holdings (NYSE: VIPS).
JD.com’s revenue grew 26% year-on-year during the quarter, while BABA and VIPS posted single-digit growth.
S&P Global Ratings attributes JD.com’s strong performance to two key factors – the strength of its customer group, and its significant investment in logistics and supply chain infrastructure over the past few years.
“Its (JD.com’s) core consumers tend to shop with a specific need, and are less inclined to make impulse purchases. The entity’s marketplace platform has also been helped by improvement in its marketplace ecosystem and merchants’ recent ability to choose online vendors. We anticipate that this category will outperform JD.com’s online retail business in the coming quarters,” said the leading credit rating agency.
“JD.com has also been investing heavily for years now in its logistics and supply chain infrastructure. This has given the entity better control over supply chains while its competitors were hit with outages.
“We also expect the firm’s logistics arm (JD Logistics), which offers integrated supply chain solutions and logistics services to external customers, will grow smartly over the coming quarters. JD.com has stronger relationships with suppliers than its peers. This translates into better product offerings, which can mitigate the effect of occasional shortages.”
S&P expects JD.com’s revenue to continue growing above 18% per year in the next 12-24 months, while maintain its EBITDA, despite investments in new businesses.
JD.com has yet to close its Chinese renminbi (RMB) 5.1 billion investment in DADA Nexus Ltd., and is also looking to invest up to RMB13.4 billion in China Logistics Property Holdings Co. Ltd.
During China’s Singles’ Day Shopping Festival earlier this month, JD.Com said its total transaction volume was up 28% year-on-year.
Year-to-date, JD.com’s share price is up around 5%. Alibaba is down around 39%, while Vipshop is down more than 60%.