3. JD.com (NASDAQ:JD)
Forward PE ratio as of September 11: 6.56
Average Analyst Price Target Upside Potential: 46.61%
Number of Hedge Fund Holders: 59
JD.com (NASDAQ:JD) is an internet giant that operates as a supply chain-based technology. It offers computers, communication, consumer electronics products, home appliances, and general merchandise products.
While online retailing remains JD.com (NASDAQ:JD) ‘s biggest source of revenue and earnings, the company’s logistics arm is also experiencing tremendous growth amid a recovering global economy. The company is also benefiting from a Chinese economy that is showing signs of recovery, as depicted by higher consumer spending.
The company is also benefiting from resorting to low prices for products that keep customers returning for more. Its growing scale and operating leverage allow it to offer significant discounts, keeping customers happy on its platform.
As its e-commerce operations have seen increasing success and financial gains, JD.com (NASDAQ:JD) has ventured into new sectors such as logistics, healthcare, and financial technology. These diversifications introduce the tech behemoth to fresh prospects, particularly as the rivalry in the e-commerce sector grows due to the emergence of platforms like Pinduoduo and Douyin.
JD.com (NASDAQ:JD)’s second-quarter earnings for 2024 highlighted its robust growth trajectory, setting the stage for another year of exceptional earnings and cash flow. It delivered $40.1 billion in revenues driven by robust performance across its main business areas. Improvements in operations led to a notable jump in adjusted operating income, hitting $1.6 billion.
As a result, the profit margin grew to 5% from 3% the year before. This growth also led to a 29% increase in operating cash flow, reaching $6.98 billion, compared to $5.43 billion in the previous year. Furthermore, the company’s free cash flow rose by more than 45% to $6.82 billion.
With JD’s financials continuing to surge against a stagnant share price, the stock’s undervaluation gap has kept widening. The stock is trading at a price-to-earnings multiple of 6.5, affirming a crazy low undervaluation, given the robust underlying growth.
According to the Insider Monkey database, 59 hedge funds held stakes in JD.com (NASDAQ:JD) by the end of the second quarter. Based on 12 Wall Street analysts, JD is a buy with an average price target of $38.09, implying a 46.61% upside potential from current levels.
Ariel Investments’ Ariel Global Fund discussed JD.com, Inc. (NASDAQ:JD) in its Q1 2024 investor letter, stating:
“We initiated a position in China-based technology-driven E-commerce company, JD.com, Inc. (NASDAQ:JD). The brand has long been known across the region as a superior online shopping channel due to its unique first-party model and unparalleled fulfillment service underpinned by JD Logistics. Yet, a challenging macro environment drove shares lower as shoppers began seeking bargains. In response, the company made significant investments in elevating its third-party merchant platform to enhance its variety of product offerings and price competitiveness for consumers. We believe these actions will yield an improved product mix, stronger top-line growth and margin expansion on a go-forward basis.”
