Will JD.com (JD) Stock be Helped by ZestFinance Joint Venture?

NEW YORK (TheStreet) -- JD.com (JD), the Chinese Internet company, today announced a new joint venture with ZestFinance.

The venture, called JD-ZestFinance Gaia, will focus on the development of consumer credit in China, the companies said. The JV will use JD.com's consumer data and ZestFinance's machine-learning-based credit-decision technology to provide companies in China credit risk evaluating services.

JD.com will also make an investment in ZestFinance to help fund further development of the credit risk evaluating services and to extend consumer access to credit under the agreement.

"Today's announcement with ZestFinance, a leader in consumer credit evaluation, is a foundational step toward building a reliable system for assessing credit risk that will help meet the huge market need," JD Finance CEO Shengqiang Chen said in a statement. "We aim to be the single-stop solution for Chinese consumers to make all of their daily purchases, and this new JV with ZestFinance is another big step in our development."

Shares of JD.com are down 3.4% to $32.88.

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 greatly exceeded the industry average of 18.8%. Since the same quarter one year prior, revenues leaped by 62.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • JD has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
  • 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 gross profit margin for JD.COM INC -ADR is currently extremely low, coming in at 6.48%. 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 -1.93% trails the industry average.
  • You can view the full analysis from the report here: JD Ratings Report

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