Why JD.com (JD) Stock is Slipping Today

JD.com (JD) stock is down on fresh, disappointing data out of China.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- Shares of JD.com (JD) - Get Report are down by 2.83% to $27.94 as some U.S. traded China-based stocks take a hit on uncertainty surrounding China's economy and fresh economic data from there.

JD.com is a Beijing-based online direct sales company that is primarily engaged in the sale of electronics and home goods in China.

The latest data out of China showed a 1.3% rise in the country's consumer price index, below the 1.6% rise for September, CNBC.com reports. Expectations were for a 1.5% rise.

China's producer price index dropped by 5.9% last month, the 44th consecutive month of declines, following a 5.9% slump in September.

"Much of the hope for China's economic transition rests on continuing strong consumption and services sector growth [thus] it was most concerning to see a drop in consumer goods and food inflation," IG's market strategist Angus Nicholson wrote in a note, CNBC.com added.

Additionally, China's Shanghai Composite index closed lower by 0.1% on Tuesday, due to pressure on property developers and banks.

Separately, TheStreet Ratings team rates JD.COM INC -ADR as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate JD.COM INC -ADR (JD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JD's very impressive revenue growth exceeded the industry average of 45.5%. Since the same quarter one year prior, revenues leaped by 60.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • JD's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Compared to other companies in the Internet & Catalog Retail industry and the overall market, JD.COM INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Internet & Catalog Retail industry average, but is greater than that of the S&P 500. The net income increased by 12.3% when compared to the same quarter one year prior, going from -$93.90 million to -$82.33 million.
  • The gross profit margin for JD.COM INC -ADR is currently extremely low, coming in at 6.36%. Regardless of JD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.11% trails the industry average.
  • You can view the full analysis from the report here: JD

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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