(Note: The writer of this fundamental analysis is a portfolio manager and financial writer.)
The stock of JD.com Inc. (JD) has already fallen more than 54% from its 2018 highs, and technical analysis predicts another 13% down. Options traders anticipate a decline of up to 11% by the middle of March. (See: JD.com Stock Seen Falling Another 10%.)
Analysts are forecasting bad third-quarter results and have been cutting their profit and sales projections for the stock. (Read more about JD.com’s 14% decline in profits.)
JD data by YCharts
According to the chart, the stock is getting close to technical resistance around about $22.80. The stock might plummet to around $20 if the price drops below that mark.
Additionally, the relative strength index (RSI) is emitting alerts. Since peaking in the spring of 2017, it has been going downward. The trend has not altered, despite the RSI presently being at oversold levels at 30. It implies that the stock is losing its positive momentum.
Bearish Options Bets
The price is expected to decline to about $21 according to the $24 puts that will expire on March 15. At that strike price, there are approximately four times as many bearish puts as bullish calls.
Over the last month, analysts have decreased third-quarter profit expectations by roughly 4% and currently project earnings to decline by more than 32%. Estimates for revenue have also decreased.
JD EPS Estimates for Current Fiscal Year data by YCharts
The forecast for JD.com’s profits has considerably worsened. In contrast to prior predictions that profits would increase 21%, analysts now predict that this year’s earnings would decline by 28%. If those profit forecasts drop much lower, the stock will probably continue to tumble.
The owner and manager of the actively managed, long-only Thematic Growth Portfolio atMott Capital Management LLC, a registered investment advisor, is Michael Kramer. Kramer often invests in equities and retains them for three to five years. For more on Kramer’s background and assets, go here. The information provided is only for educational reasons and is not meant to be a solicitation or an offer to buy or sell any particular securities, investments, or financial strategies. Unless otherwise noted, investments entail risk and cannot be guaranteed. Before putting any of the strategies described here into action, be sure to speak with a skilled financial advisor and/or tax expert first. The adviser will offer a list of all suggestions made in the previous year upon request. Performance in the past does not guarantee performance in the future.
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