Should you invest in JD.com shares in Q3 after solid Q2 results?

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on Aug 23, 2021
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  • JD.com shares on Monday edged slightly higher after delivering solid Q2 results.
  • The company announced its most recent quarterly results before markets opened, beating expectations.
  • However, Chinese tech stocks continue to experience pressure from changing government regulations.

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On Monday, JD.com Inc. (HKG:09618) shares edged higher nearly 1% after announcing solid Q2 results. The company reported its most recent quarterly results before markets opened, beating analyst expectations.

The company reported non-GAAP Q2 earnings per share of $0.45, beating the consensus Street estimate of $0.34. However, the GAAP EPS of $0.08 came short of the average analyst estimate of $0.21. On the other hand, JD.com revenue for the quarter grew by 37.9% to $39.3 billion, outperforming the consensus estimate by $1.12 billion. However, JD’s adjusted operating margin of just 1% came in lower than the analyst expectations of 1.45%.

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The Chinese e-commerce company’s annual user-base grew by 27.4% to 531.9 million.

The company commented on its improvement from last year’s high growth despite the current business climate.

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Chief Financial Officer Sandy Xu said:

Our consistent execution and successful 618 Grand Promotion helped us to add over 32 million new users in Q2, the largest single-quarter increase in JD.com’s history.

Why buy JD.com shares in Q3 2021?

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From a valuation perspective, JD.com shares trade at an exciting P/E ratio of just 12.66, making the stock attractive to value investors. Furthermore, analysts expect JD earnings per share to grow by a whopping 287% this year before rising by 68.46% next year. 

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Therefore, short-term growth investors could find JD stock compelling ahead of its promising growth story. However, the company’s 5-year average annual EPS growth rate of just 3.73% could dissuade some growth investors amid the growing uncertainty on Chinese regulations.

Therefore, it could be best to buy the stock short-term and monitor performances in the coming quarters.

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Source – TradingView

Technical overview: JD.com stock price forecast for Q3 2021

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Technically, JD.com shares seem to be trading within a descending channel formation in the intraday chart. However, the stock has recently rebounded to avoid crossing to oversold conditions of the 14-day RSI, creating a perfect opportunity to buy.

Furthermore, the stock is yet to hit overbought conditions, leaving room for more upward movement. Therefore, investors can target profits at approximately $71.81 or higher at $79.44. On the other hand, the support levels are $59.60 and $51.38.

Bottom line: the case for buying JD.com shares now

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In summary, although JD.com shares seem to be trading under intense bearish pressure, the recent rebound appears to have strong momentum to continue further. 

In addition, the stock seems significantly undervalued based on its P/E ratio of just 12.66, making it a compelling option for investors.

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