Chinese Stock Upgraded Ahead of Earnings

JD.com will report first-quarter earnings next week

Managing Editor
Apr 30, 2019 at 10:28 AM
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The shares of JD.com Inc (NASDAQ:JD) are up 2.4% to trade at $30.60 this morning, after J.P. Morgan Securities raised its rating to "overweight" from "neutral." The brokerage firm also upped its price target to $38 from $30, while noting several positive catalysts for JD stock, including improving demand, new product launches, and Chinese government stimulus plans. This comes ahead of JD.com's expected earnings release on May 10.

JD.com stock has carved out a channel of higher highs since its Nov. 23 bottom near $19. Since April, though, the shares have consolidated in the $29-$31 range. This area is also home to a 50% year-to-date gain for JD.

Looking at JD.com's earnings history, the stock has closed lower the day after reporting in five of its past eight reports, but jumped 6.7% the day after its February earnings release. Over the past two years, the shares have swung an average of 5.1% the day after earnings, regardless of direction. This time around, the options market is pricing in a higher-than-usual 7.8% swing. 

Analysts seems to be wary. Of the 14 brokerages covering JD, 11 rate it a tepid "hold," and the consensus 12-month price target of $30.19 is a discount to its current perch. Short sellers, though, have been heading for the hills. Short interest fell by 6.2% in the most recent reporting period, yet the 62.97 million shares still sold short represent a healthy 7.8% of the security's total available float, and four days' worth of pent-up buying demand, at JD's average pace of trading.

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