- China's post-Covid spending spree to stimulate JD.Com, Inc (NASDAQ:JD) has failed to yield results.
- A slow and erratic recovery from the pandemic recession and competition from rivals PDD Holdings Inc (NASDAQ:PDD) and ByteDance Ltd prompted estimate cuts from the likes of Goldman Sachs Group Inc (NYSE:GS) and UBS Group AG (NYSE:UBS), Bloomberg reports.
- Demand for big-ticket items is still weak, spelling bad news for a company that counts on electronics and home appliances for half its sales.
- After dropping 37% since the start of the year, JD.com trails all its peers in the benchmark Hang Seng Tech Index.
- Signs of cracks in the shares' rally surfaced in February amid reports of JD.com's 10 billion yuan ($1.5 billion) discount campaign to fend off a challenge from PDD's budget shopping app Pinduoduo.
- While JD.com has consistently excelled in value-added services, it's difficult for the company to beat Pinduoduo on price wars and promotions, according to Xiadong Bao, fund manager at Edmond de Rothschild Asset Management.
- Additionally, in March, JD.com warned against a robust recovery in consumption unlikely to materialize until the second half, with China's latest economic data vouching for the same.
- Further, reports of organizational changes in JD.com's logistics and retail arms prompted Barclays analyst Jiong Shao to expect to cause near-term business disruption.
- Another initiative to move some products to third-party merchants will likely hit sales in coming quarters, Shao wrote in a note.
- Analysts now expect JD.com's revenue growth to slow to 5.8% in 2023 from 10% in 2022, well below a projected gain of 28% for PDD.
- "Investors who want to do some rebalancing within the Chinese tech sector would choose to long Alibaba Group Holding Limited (NYSE:BABA) or Tencent Holding Ltd (OTC:TCEHY) to bet on a sharper business turnaround," said Kenny Wen, head of the investment strategy at KGI Asia Ltd.
- Price Action: JD shares traded lower by 1.21% at $35.20 premarket on the last check Monday.
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