Why JD.com Stock Surged This Week

Shares ofJD.com(NASDAQ:JD) popped this week after the Chinese e-commerce giant posted a strong second-quarter earnings report Monday morning; and then Cathie Wood’s ARK Invest revealed a significant purchase of JD.com that night, driving a spike in JD and other Chinese tech stocks on Tuesday.

As of Thursday’s market close, the stock was up 21.1% for the week.

JD.com Founder Richard Liu delivering packages.g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640928/jdcom-ceo-richard-liu-delivering-orders-on-june-18-the-companys-anniversary-1.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640928/jdcom-ceo-richard-liu-delivering-orders-on-june-18-the-companys-anniversary-1.jpg&w=2000&op=resize 2000w”/>

Image source: JD.com.

So what

JD shares gained 3.3% on Monday after the company reported better-than-expected results for its second quarter. Revenue jumped 26.2% to $39.3 billion, ahead of estimates at $38.7 billion. Annual active customer accounts were up 27.4% to 531.9 million, and its adjusted operating profit fell from $900 million to $400 million as the company stepped up investments in its logistics division and in new businesses.

On the bottom line, adjusted earnings per share came in at $0.45, down from $0.54 in the quarter a year ago, but that still beat estimates at $0.35.

While that result was strong enough to lift the stock, the real fireworks came on Tuesday after Wood’s ARK Autonomous Technology & Robotics ETF reported buying 165,000 shares of JD, or the equivalent of 0.4% of the exchange-traded fund (ETF). The move boosted confidence in the stock as Wood’s trades are closely followed, and ARK had sold off nearly all of its Chinese holdings following the crackdown on the education sector. Wood, herself, argued at that time that Chinese stocks would be discounted for the foreseeable future because of the regulatory threat, but her company appears to have made an exception for JD. The stock gained 14.4% that day on high-volume trading.

Now what

Chinese tech stocks have been highly volatile in recent weeks, tumbling after the government banned tutoring companies from making a profit, but Wood’s bet on JD could spark a reversal as a number of battered tech stocks rallied on the news.

JD has yet to receive any significant punishment from the government and seems less under threat than larger companies likeAlibaba. Meanwhile, the company continues to make strides across its business, growing into China’s large addressable market. Despite the regulatory woes, the future still looks bright for JD.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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