JD: An Online Giant in China

Focus: STOCKS

Paul Goodwin Image Paul Goodwin Emerging Markets Specialist and Analyst, Cabot Heritage Corporation

JD.com (JD), a company with a great story, improving fundamentals and a surprisingly serene chart, notes Paul Goodwin, international investing expert and editor of Cabot Emerging Markets Investor.

It is actually China’s largest e-commerce company by revenue, an online retailer with a hefty $37.7 billion market cap and a similarly impressive $35.7 billion in annual sales.

The company differs from China’s other online giant, Alibaba (BABA), in that it owns and warehouses its own inventory (in 254 warehouses) and delivers via its own distribution network that includes fulfillment centers in seven cities and front distribution centers in 25 cities.

85% of JD’s orders nationwide receive either same-day or next-day delivery. The company offers special services for frequent buyers called JD Prime.

As of its Q3 earnings report in November 2016, JD.com boasted just shy of 200 million active customer accounts, which is up from 155 million at the end of 2015.

And 80% of all orders in Q3 were placed via mobile devices, which confirms the dominance of mobile vs. PCs in China’s online shopping life.

Electronics and home appliances have historically made up almost two-thirds of annual revenue, but general merchandise—so call “fast-moving consumer goods”—are playing an increasing role.

JD.com has one big trait in common with Amazon (AMZN) — it has spent years plowing its free cash flow back into the business to build its distribution network and grow its market share.

Despite years of increasing revenue and cash flow, JD.com booked losses in seven of the 10 quarterly reports from Q4 2014 to Q1 2016.