We recently published a list of The 10 best e-commerce stocks to invest in. In this article, we take a look at how JD.com, Inc. (NASDAQ:JD) compares to other e-commerce stocks.
An overview of the e-commerce industry
According to a report by Forbes, the value of the e-commerce industry is expected to grow from $6.3 trillion in 2024 to $7.9 trillion in 2027. In 2027, 23% of retail purchases are expected to be made online, compared to 20.1% in 2024.
A rise in consumer confidence after a period of sluggish growth has been a key catalyst in improving the e-commerce industry’s position. On July 30, Reuters reported that the U.S. consumer confidence index rose to 100.3 in July after being revised downward to 97.8 in June. Previously, experts had predicted the index would fall to 99.7 after it reached 100.4 basis points. Chief economist Dana Peterson opined that while consumers remain resilient, they are concerned about rising prices and interest rates. Despite an uncertain macroeconomic environment, e-commerce companies are taking advantage of current consumer sentiment by cutting their prices. Companies like Target have also revised their earnings for fiscal 2024 upward as lower prices have attracted more customers.
To shed light on the state of online retail, Michelle Meyer, chief economist of the US Mastercard Economics Institute, appeared in a interview To Yahoo Finance on August 16. Online retail sales increased 8.2% in July, compared to a growth rate of 2.9% in July 2023. She further explains that personal finances, time efficiency, and the general state of the labor market influence which websites consumers shop on. Meyer also added that the average U.S. resident experienced an increase in wealth in the last quarter, which has a positive impact on consumer spending and, in turn, online retail.
What does the competitive e-commerce landscape look like?
The future of e-commerce is unpredictable. Bans on products from China, questions about cheap labor, criticism of fast fashion, and the increasing use of technology are various forces shaping the industry. In the first quarter of 2024, the US pushed to ban TikTok in the country, which stoked fear among Chinese e-commerce sites such as Shein and Temu. In April, lawmakers in the US proposed banning Temu for violating labor rights. In addition, on August 21, Shein sued Temu for copyright infringement. Shein claimed that Temu stole the company’s designs and trade secrets, causing Temu to lose money on every sale. Despite this, Temu’s founder, Colin Huang, is the richest person in China with a net worth of $51.4 billion as of August 22. You can also take a look at the The best Chinese stocks to buy now.
On the other hand, e-commerce sites in the United States are trying to gain an edge over their competitors by using advanced technology. Walmart, for example, has introduced a generative AI search tool that can show customers a list of ideal products or items they need. For example, a customer who wants to host a birthday party but doesn’t know what items they need could use the search tool to save time. It’s a similar story with Amazon, which introduced Rufus, an AI shopping assistant, earlier this year. Rufus can personally assist a buyer and help them find the right products. When we talk about technology, we can’t leave out eBay’s magical listing tool for sellers, which is powered by artificial intelligence. The tool can analyze images, categories, and titles to curate product descriptions, prices, and shipping costs. Also, read our article on the the latest AI news and analyst reviews you shouldn’t miss.
As the e-commerce industry grows, it is important to know which companies are leading the race. Also read our article on the the best advertising stocks to buy according to short sellers.
Our methodology
To compile the list of the 10 best e-commerce stocks to invest in, we looked at the holdings of e-commerce ETFs and searched for internet retail companies using the Finviz stock screener. We sorted our picks by market cap and looked at the 20 largest e-commerce companies. We chose the stocks that were most held by institutional investors in Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Note: All price data is correct as of August 22nd.
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A comprehensive and impressive view of a supply chain distribution center that illustrates the company’s technological capabilities.
JD.com, Inc. (NASDAQ:JD)
Number of hedge fund owners: 59
JD.com, Inc. (NASDAQ:JD) ranks eighth on our list of the best e-commerce stocks to invest in. Jd.com, commonly called Jingdong, is one of the largest e-commerce companies in China. JD.com, Inc. (NASDAQ:JD) also provides services in logistics, cloud, healthcare, industrial, and real estate.
Jd.com, Inc. has more than 1,600 warehouses and currently serves more than 200 countries and regions around the world. Its online marketplace hosts millions of products, such as home appliances, appliances, computers, household products, and clothing. In the second quarter of 2024, JD.com, Inc. (NASDAQ:JD) entered into strategic partnerships with popular brands such as Xiaomi, Lenovo, and Oppo to automate its supply chain, and onboarded Inditex and MONCLER to diversify its product base.
While falling consumer spending has reduced the average order size, JD’s retail segment reported revenue of $35.37 billion in the second quarter of 2024, up 1.5% year-on-year. Both total order volume and shipping frequency grew by double digits during the quarter, indicating a high customer acquisition rate.
JD.com’s (NASDAQ:JD) value proposition lies in low prices driven by subsidies and a strong e-commerce ecosystem supported by the company’s logistics and technology capabilities.
Analysts are bullish on JD and their 12-month median price target of $40.1 suggests 49% upside potential from current levels. 59 investors were bullish on the stock at the end of Q2 2024, with their total holdings amounting to $1.34 billion. As of June 30, Alkeon Capital Management was the largest shareholder with a stake worth $171.48 million.
JD is attractive at current levels. The stock trades at 7.3 times forward earnings, a 53% discount to the industry P/E ratio. Analysts expect earnings to rise 19% this year.
Ariel Investments Ariel Global Fund announced the following on JD.com, Inc. (NASDAQ:JD) in the first quarter of 2024 Investor letter:
“We initiated a position in China-based technology-focused e-commerce company JD.com, Inc. (NASDAQ:JD). The brand has long been known throughout the region as a superior online shopping channel due to its unique first-party model and unparalleled fulfillment service backed by JD Logistics. However, a challenging macroeconomic environment drove shares lower as shoppers began to hunt for bargains. In response, the company made significant investments in enhancing its third-party merchant platform to improve the diversity of its product offering and its price competitiveness for consumers. We believe these actions will result in improved product mix, stronger revenue growth and margin expansion on a future basis.”
Total JD takes 8th place on our list of the best e-commerce stocks to buy. While we recognize JD’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than JD but trades at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
