JD.com's JD recent stock performance has caught the eye of many investors, with shares surging 56.9% over the past six months compared with the industry, the Zacks Retail-Wholesale sector and the S&P 500 index’s return of 31.6%, 19.3% and 6.4%, respectively. JD has outperformed its peers — Alibaba BABA and PDD Holdings PDD. BABA has gained 53.1% and PDD has returned 29.5% over the past six months.

6-Month Performance

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This impressive run comes as the Chinese e-commerce giant strengthens its market position through enhanced services, strategic investments, and a focus on profitability amid improving consumer sentiment in China. But with such rapid appreciation, investors now face the critical question: is JD stock still worth buying, or should they exercise patience?

Strong Q3 Results of JD Underscore Growth Trajectory

JD.com's third-quarter 2024 financial results revealed solid momentum across key metrics. Net revenues increased 5.1% year over year to RMB260.4 billion (US$37.1 billion), exceeding analyst expectations. More impressive was the company's profitability improvement, with non-GAAP net income attributable to ordinary shareholders jumping 23.9% to RMB13.2 billion (US$1.9 billion), resulting in a net margin of 5.1%, up from 4.3% a year earlier.

The company's financial strength is further evidenced by its aggressive share repurchase program. JD.com has completed its $3 billion share repurchase program announced in March 2024 and launched a new $5 billion program that will run through August 2027. In the first nine months of 2024, the company repurchased approximately 8.1% of its outstanding shares, demonstrating management's confidence in JD's intrinsic value.

The Zacks Consensus Estimate for 2025 revenues is pegged at $166.43 billion, indicating 6.22% year-over-year growth, while earnings estimates suggest 7.73% growth. 

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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

JD.com’s Supply Chain Excellence Drives Performance

During the third-quarter earnings call, CEO Sandy Xu emphasized that JD.com's success stems from its "relentless focus on building supply chain capabilities and logistics infrastructure." This investment has paid off as the company played a pivotal role in China's nationwide trade-in program for home appliances, leveraging its strong user mindshare and integrated services covering delivery, installation, and dismantling.

The general merchandise category, particularly supermarket items, continues to demonstrate robust growth, with revenues increasing 8% year over year. User engagement metrics are encouraging, with quarterly active customers growing at double-digit rates for four consecutive quarters and shopping frequency maintaining double-digit year-over-year growth in the third quarter.

JD.com’s Recent Innovations Strengthen User Ecosystem

JD.com is continuously enhancing its ecosystem with new features aimed at strengthening user loyalty. The introduction of a gift-giving feature ahead of the Chinese New Year and the significant upgrade to its JD PLUS paid membership program demonstrates the company's commitment to improving the user experience.

The JD PLUS membership now includes lifestyle services, expanded free shipping options, and premium replacement policies. These enhancements are particularly significant as JD PLUS members spend an average of 10 times more than non-members annually and increase their spending by 150% after subscribing.

Stock Valuation and Competition of JD

From a valuation perspective, JD.com presents an intriguing opportunity, trading at a forward 12-month P/E of 8.9X compared to the industry average of 24.13X. This discount reflects lingering concerns about China's economic growth and regulatory environment, despite recent government stimulus measures that appear to be improving consumer sentiment.

JD’s P/E F12M Ratio Depicts Discounted Valuation

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The company is well-positioned to capitalize on China's e-commerce growth, with management expressing cautious optimism about the economic trajectory. JD.com continues to face intense competition from domestic rivals like Alibaba, PDD Holdings (Pinduoduo), and emerging players in specialized segments. JD's expansion into fashion and beauty categories, with reported investments of RMB3 billion and RMB1 billion, respectively, demonstrates its commitment to competing in high-margin segments where it has traditionally lagged behind Alibaba's Tmall. The company is leveraging both its 1P (first-party) expertise and expanding its 3P (third-party) marketplace to counter competitive threats.

Notably, JD Logistics recently partnered with Alibaba's Taobao and Tmall platforms, allowing merchants on those platforms to select JD Logistics as a service provider. This strategic move could expand JD's logistics revenues while highlighting the strength of its infrastructure even among competitors.

Investment Outlook: Hold or Wait for Better Entry

Despite JD.com's impressive recent performance and compelling valuation, investors may want to consider a more measured approach in the near term. The stock's significant appreciation over the past six months suggests that much of the positive news may already be priced in.

Additionally, while government stimulus measures are generating positive momentum, lingering uncertainties remain about the sustainability of China's economic recovery and potential regulatory shifts. The company's executives have described their outlook as "cautiously optimistic."

For current shareholders, holding the position is justified by JD's strong fundamentals, ongoing share repurchases, and continued operational improvements. However, new investors might benefit from waiting for a more attractive entry point, potentially during market volatility in 2025, when the full effects of government stimulus measures and the company's strategic investments become clearer.

Overall, JD.com represents a strong player in China's e-commerce landscape with impressive financial discipline and growth initiatives, but the timing of investment requires careful consideration given recent price appreciation and broader market dynamics. JD.com currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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