(Please keep in mind that the author of this fundamental study is also a financial writer and portfolio manager.)
JD.com Inc.’s (JD) stock is currently down more than 54% from its 2018 highs, and technical analysis shows the stock might fall another 13%. Options traders are also negative, predicting an 11% drop by the middle of March. (See: JD.com Stock Drops 10% Further.)
Analysts have reduced their profit and sales projections for the company, predicting poor third-quarter results. (See: JD.com Drops 14% As Profits Fall.)
JD data by YCharts
According to the chart, the stock is nearing technical support of roughly $22.80. If the price falls below that level, the stock might fall to roughly $20.
The relative strength index (RSI) is also throwing out cautionary signs. Since peaking in the spring of 2017, it has been going downward. Even though the RSI is presently at oversold levels at 30, the trend remains same. It signals that the stock’s positive momentum is fading.
Bearish Options Bets
The $24 puts expiring on March 15 predict that the price will fall to about $21. At that strike price, the number of bearish puts outnumbers the number of bullish calls by about four to one.
Analysts have cut third-quarter profit predictions by roughly 4% in the last month, and now expect earnings to decline by more than 32%. Revenue projections have also been reduced.
JD EPS Estimates for Current Fiscal Year data by YCharts
JD.com’s profit forecast has dramatically deteriorated. Analysts now predict that earnings would decline by 28% this year, reversing prior predictions that profits would climb by 21%. If those profit forecasts fall more, the stock is expected to fall further.
Michael Kramer is the Founder and Manager of Mott Capital Management LLC, a registered investment advisor, and the manager of the firm’s actively managed, long-only Thematic Growth Portfolio. Kramer normally purchases and keeps equities for three to five years. Click here to see Kramer’s profile and portfolio holdings. The information offered is only for educational purposes and does not constitute an offer or solicitation to sell or buy any particular stocks, assets, or financial strategies. Unless otherwise specified, investments involve risk and are not guaranteed. Before adopting any of the strategies outlined here, contact with a knowledgeable financial advisor and/or tax expert. The adviser will offer a list of all suggestions made in the previous twelve months upon request. Past performance does not predict future performance.
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