JD.com (NASDAQ:JD) has a chance to hold the $30 level after reporting another strong quarter. CAGR growth is firmly in the double digits, helped by increasing online penetration and growth in the China online retail space.
JD.com’s online retail penetration in China was 19.6% in 2019/H1, up from 18.4% last year. Its retail market size is expected to reach RMB 10.8 billion ($1.53 billion U.S.) by 2020. At a CAGR of 37% in the last three years, the company is the top listed retailer in China. Its growth outpaces that of Amazon.com (NASDAQ:AMZN), whose CAGR is 30%.
Looking ahead to the third quarter, net revenue will grow between 20% - 24% Y/Y. Despite macro uncertainties in China, JD.com is optimistic. Net margin for the full year of 2.5% signals business strength. Demand in retail is so strong that management is raising its FY2019 net income guidance to between RMB8 billion and RMB9.6 billion ($1.14 billion - $1.36 billion U.S).
Investments
The company is investing in the lower tier city initiatives, from the WeChat platform to logistics. This will improve the customer experience and drive sustained growth for the next few years. With operating leverage ahead, expect a falling fulfillment expense ratio lifting profitability.
In the near-term, JD stock may move with the negative U.S./China trade war news. But fundamentals support the stock trading higher regardless of the outcome of the trade negotiations.
