JD.com stock deserves another look, here’s why

Investing in value opportunities usually comes with the feeling that you are going against the consensus, where everyone else will misunderstand your reasoning behind a potential investment and even tell you why you are wrong. However, value investors like Warren Buffett and Michael Burry are accustomed to ignoring this feeling and almost always come out on top.

Today, the market is focused on the massive bullish and bullish price action seen in the technology stocks sector, with names like NVIDIA NASDAQ:NVDA surpassing their all-time highs as if they were no barrier. However, not all tech stocks are created equal; It appears that the rally has not reached stocks in this sector in other countries such as China.

Dubbed “uninvestable,” Chinese stocks have seen nothing but fear and even hatred from investors around the world. However, it’s the 1% of investors like Burry who know how to spot the value in stocks like this JD.com Inc. NASDAQ:JDwhere the spillover effect of a new technological boom has not yet been seen due to stubborn fear and sentiment towards the Asian power.

Join the party

But Burry isn’t alone in buying a basket of Chinese stocks Alibaba Group NYSE: CHILD as a clear value proposition that is ignored today. Other major players on Wall Street, such as Ray Dalio, have also quietly entered the national stock market and allocated large amounts of capital.

According to documents filed by 13-F, Ray Dalio’s hedge fund, Bridgewater Associates (the largest in the world), purchased iShares MSCI China ETF NASDAQ:MCHI since October 2023. There are many reasons why Dalio – a macro investor – sees value in China; here’s one.

The Chinese government is now applying several measures to rescue and support its financial markets, with the latest wave of stimulus including a capital injection of $278 billion along with a ban on short selling across the stock market. The CSI 300 (China’s S&P 500) is now at a five-year low, so cheap that the average dividend yield is up to 5.5%.

By the way, bonds in China offer a yield of just 2.5% over ten years, which means investors can (in theory) beat bonds by simply picking a random stock in the Chinese market, which in any other country would have already done so. brought a massive wave of buying and an influx of global investors.

The fact that China has not seen this influx is a testament to how stubbornly bearish people are today, which is a plus for you.

Looking at the Internet commerce sector as a whole, you will notice that it is trading at an average of 87% of its 52-week high prices, where JD.com comes out the worst at only 45% of its 52-week high prices , meaning it’s also the cheapest and most discounted name in an otherwise bullish space.

Build your case

Price action is one thing, but you also need to consider more traditional valuation metrics, such as price-to-earnings ratio and price-to-book ratio. So, your job now becomes to figure out if JD.com is also offering you a discount on these factors and price action.

There has to be a reason why Wall Street analysts see up to 83% upside from the stock’s current value, all reflected in their consensus price target of $42 per share. Capitalizing on China’s economic recovery, and perhaps even interest from other mega investors, this target makes a lot of sense.

As a peer group, the Internet Commerce sector trades at an average P/E ratio of 25.3x, while JD.com features a 73% discount with its P/E ratio of 6.9x, making a case seriously underestimated. Based on the P/B ratio, the apple doesn’t fall too far from the tree.

With a ratio of 0.8x, JD.com also offers a massive 90% discount to the industry average valuation of 8.0x. By the way, today’s stock price is so low that markets haven’t seen JD.com trade at these ranges since 2018; meanwhile, earnings and financials have grown tremendously year after year, making these prices unjustified to say the least.

In any case, it may be remembered that, historically, when stock market returns are higher than those of bonds, blind stock picking (although also a risky venture) tends to be an almost guaranteed way to make money. By aligning the odds in your favor with a consumer discretionary stock like JD.com, the picture could be much brighter for you.

Before considering JD.com, you’ll want to hear it out.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and JD.com wasn’t on the list.

While JD.com currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here