To The Moon

$JD.com(JD)$ is scheduled to release their earnings on 06 Mar 2024 before market opens.

JD.com upcoming EPS (earnings per share) is expected to come in at $0.65, this is a 7.14% drop compared to the same quarter of the previous year. Consensus estimate for revenue expected at $42.56 billion, down 0.65% from the prior-year quarter.

It was reported by Sina Technology News on 04 March that JD has issued a merchant announcement stating that on top of the existing free shipping rules for 90% of third-party products, the free shipping rules on the open platform will be further optimized.

This would mean all 13 categories of products, such as home appliances, kitchenware, health products, etc., are all free shipping at 0 yuan, that is, free shipping for an unlimited amount of money. This would be interesting to see how it could help JD to recover from its downtrend so far.

Technical is showing that JD is experiencing a downtrend, this upcoming earnings would be something to look out as China economy is underway and how the other ecommerce company have been affected will serve as a cautious.

JD.com (JD) Last Reported Earnings

JD last reported earnings on 15 Nov 2023 before the market opened (BMO). JD shares gained +7.0% the day following the earnings announcement to close at 28.59. Following its earnings release, 110 days ago, JD stock has drifted -23.5% lower.

From the time it announced earnings, JD traded in a range between 20.82 and 29.19. The last price (21.88) is closer to the lower end of range.

Estimated implied straddle for upcoming earnings is 9.8%. We might need to see a better-than-expected revenue in order to have at least a 5% positive price effect for JD.com post earnings.

Fair Value for JD.com

The projected fair value for JD.com is US$44.69 based on 2 Stage Free Cash Flow to Equity. Current share price of US$23.00 suggests JD.com is potentially 49% undervalued.

Analyst price target for JD is CN¥39.84 which is 11% below our fair value estimate.

Usually, a two-stage model is used when calculating a stock's intrinsic value using a discounted cash flow model. The first stage is called the growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

What I would think is we need to look closely at the Earnings Per Share, even though it is currently below its fair value, we need it to show profitability.

By looking at the GF score, there are growth and financial strength for JD.com, but coming to profitability and momentum, JD,com is not there yet.

This is something I think investors would be looking at while trading the stock.

JD.com (JD) Post Earnings Movement

The options market overestimated JD stocks earnings move 75% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.1% on average vs an average of the actual earnings moves of 5.5% (in absolute terms).

Option valuation is slightly overvalued, this suggest we might see some slight volatility, but I would expect it to be on the downside.

JD.com (JD) Skew Indicator

The current skew indicator is showing Slightly Bearish.

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. As the implied volatility for downside puts is increasing relative to upside calls,this suggests the market is pricing in a larger fear to a downside move.

Summary

JD.com could be suffering from loss of businesses due to the competition with $Alibaba(BABA)$ , the recent announcement to cut shipping costs might be a good move.

The question we need to seek is whether this is sustainable, because in the long run, this could eat into their profit as operating expenses would increase, unless the invested growth could cover this costs.

Appreciate if you could share your thoughts in the comment section whether you think JD.com could surprise us with huge revenue growth and turn a downtrend to upside?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.