Is There An Opportunity With JD.com, Inc.'s (NASDAQ:JD) 49% Undervaluation?

Simply Wall St.03-04

Key Insights 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 ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIs There An Opportunity With JD.com, Inc.'s (NASDAQ:JD) 49% Undervaluation?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-04 22:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/opportunity-jd-com-inc-nasdaq-140012666.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for JD.com is US$44.69 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$23.00 suggests JD.com is potentially 49% undervalued \n  Analyst ...</p>\n\n<a href=\"https://finance.yahoo.com/news/opportunity-jd-com-inc-nasdaq-140012666.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4504","symbol_name":"桥水持仓","start_time":0,"source_url":"https://finance.yahoo.com/news/opportunity-jd-com-inc-nasdaq-140012666.html","article_id":"2416141589","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/idUHYnUHv_aVOL0PF6o4vA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/d0e0583e2b216efa1f3393fad3de0bcc"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2416141589","pubTimestamp":1709560812,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"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 CN39.84 which is 11% below our fair value estimate. In this article we are going to estimate the intrinsic value of JD.com, Inc.  by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow  model. There's really not all that much to it, even though it might appear quite complex.Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.Present Value of Terminal Value = TV / 10= CN630b÷ 10= CN276","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4504":"桥水持仓","JD":"京东","JDCMF":"JD.com, Inc.","BK4122":"互联网与直销零售","BK4579":"人工智能","TQQQ":"纳指三倍做多ETF","LU0106959298.USD":"UBS (LUX) EQUITY FUND - EMERGING MARKETS SUSTAINABLE LEADERS (USD) \"P\" (USD) ACC","FCF":"第一联邦金融","BK4100":"有线和卫星","QLD":"纳指两倍做多ETF","QQQ":"纳指100ETF","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","IE0008368742.USD":"首域中国增长基金I Acc","SG9999002463.SGD":"LionGlobal China Growth SGD",".IXIC":"NASDAQ Composite","PSQ":"纳指反向ETF","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","BK4531":"中概回港概念","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","TV":"墨西哥电视","09618":"京东集团-SW","BK4585":"ETF&股票定投概念","SQQQ":"纳指三倍做空ETF","BK4509":"腾讯概念","BK4211":"区域性银行","BK4558":"双十一","IE00BGV7N243.SGD":"FSSA Global Emerging Markets Focus I Acc SGD","BK4220":"综合零售","BK4524":"宅经济概念","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","LU1688375341.USD":"贝莱德中国灵活股票基金","BK4588":"碎股","BK4526":"热门中概股","BK4112":"金融交易所和数据","BK4503":"景林资产持仓","BK4551":"寇图资本持仓","NDAQ":"纳斯达克OMX交易所","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","BK4505":"高瓴资本持仓","QID":"纳指两倍做空ETF"},"translate_title":"京东公司（纳斯达克：JD）被低估49%还有机会吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TV":1,".IXIC":1,"FCF":1,"DCF":1,"JD":1,"JDCMF":1,"NDAQ":1,"MNQmain":0.6,"PSQ":0.6,"QID":0.6,"QLD":0.6,"QQQ":0.6,"SQQQ":0.6,"TQQQ":0.6,"09618":0.6,"NQmain":0.6},"content_text":"Key Insights\n\n The projected fair value for JD.com is US$44.69 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$23.00 suggests JD.com is potentially 49% undervalued \n  Analyst price target for JD is CN¥39.84 which is 11% below our fair value estimate \n\n In this article we are going to estimate the intrinsic value of JD.com, Inc. (NASDAQ:JD) by projecting its future cash flows and then discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. \n Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n See our latest analysis for JD.com \n The Calculation \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2024\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n\n\n Levered FCF (CN¥, Millions) \nCN¥32.4b\nCN¥37.3b\nCN¥30.1b\nCN¥32.7b\nCN¥36.3b\nCN¥36.5b\nCN¥37.0b\nCN¥37.5b\nCN¥38.1b\nCN¥38.9b\n\n\nGrowth Rate Estimate Source\nAnalyst x6\nAnalyst x6\nAnalyst x2\nAnalyst x1\nAnalyst x1\nEst @ 0.63%\nEst @ 1.13%\nEst @ 1.48%\nEst @ 1.72%\nEst @ 1.89%\n\n\n Present Value (CN¥, Millions) Discounted @ 8.6% \nCN¥29.9k\nCN¥31.6k\nCN¥23.5k\nCN¥23.5k\nCN¥24.0k\nCN¥22.3k\nCN¥20.7k\nCN¥19.4k\nCN¥18.2k\nCN¥17.0k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CN¥230b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 8.6%. \nTerminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = CN¥39b× (1 + 2.3%) ÷ (8.6%– 2.3%) = CN¥630b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥630b÷ ( 1 + 8.6%)10= CN¥276b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is CN¥506b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$23.0, the company appears quite undervalued at a 49% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. \n\n\n\n  NasdaqGS:JD Discounted Cash Flow March 4th 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at JD.com as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.6%, which is based on a levered beta of 1.121. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for JD.com\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is not viewed as a risk.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for JD.\n\n\n\nWeakness\n\nDividend is low compared to the top 25% of dividend payers in the Multiline Retail market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 4 years.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for JD?\n\n\n\n Moving On: \n Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For JD.com, we've put together three relevant items you should further research: \n\n Risks: Take risks, for example - JD.com has   1 warning sign   we think you should be aware of. \nFuture Earnings: How does JD's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.\n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. 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