JD.com Fails To Impress Investors, They Flock To Alibaba For Sharper Turnaround

  • China's post-Covid spending spree to stimulate JD.Com, Inc JD has failed to yield results.
  • A slow and erratic recovery from the pandemic recession and competition from rivals PDD Holdings Inc PDD and ByteDance Ltd prompted estimate cuts from the likes of Goldman Sachs Group Inc GS and UBS Group AG 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 BABA or Tencent Holding Ltd 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.
Market News and Data brought to you by Benzinga APIs
Posted In: NewsTechMediaBriefs
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!