1 Growth Stock Down 73% to Buy Right Now

1 Growth Stock Down 73% to Buy Right Now

The past three years have been tough for China's e-commerce outfit JD.com (NASDAQ: JD). Ditto for shareholders.

Like so many other names in the business, this company and its stock sizzled during and because of the COVID-19 pandemic. Then, like so many of its peers, the wind-down of the contagion and the subsequent economic malaise have proven challenging for JD. Shares are down 73% from their early 2021 peak and still just 32% above the multiyear low reached this past January. Investors are understandably discouraged.

As the old adage goes, it's darkest before the dawn. This is precisely the time forward-thinking investors should be stepping into a new position in JD stock.

Here's a closer look at what makes this particular ticker so bullish right now.

JD.com is more different than similar 

In a market dominated by Alibaba's (NYSE: BABA) online-shopping platforms Taobao and Tmall at the same time investors are recently enamored of Temu parent PDD (NASDAQ: PDD) (you may know it better as Pinduoduo), JD.com just isn't turning many heads.

Don't be fooled, however. While smaller and lesser known than its chief rivals, in many regards JD is the better bet.

But first things first.

On the surface, JD is just another e-commerce player. It is different, however, from Tmall and Taobao. Whereas Alibaba's platforms offer third-party sellers access to consumers through its online malls, JD.com largely is the seller. It does work with third-party vendors but with a large network of over 1,600 of its own warehouses, plus more than 2,000 third-party-operated warehouses, plus a delivery-logistics network that's arguably better-developed than Alibaba's, it's got far more control of a customer's entire online shopping experience. It's also very cost-efficient in terms of receiving, storing, and then shipping goods to buyers, with a great deal of its warehousing work now handled by robots.

This hasn't necessary helped keep the stock propped up of late. China's prolonged pandemic lockdowns took a clear economic toll, crimping the country and its neighbors' economic growth. Many investors -- once bullish on all-things China -- have lost faith and lost interest in JD and its peers. They're now moving on to seemingly more compelling opportunities like artificial intelligence stocks.

Don't make the same mistake, especially now that we're seeing signs of rekindled growth from the region and from JD.com in particular.

Growth on the (near-term) horizon

Contrary to a common assumption, China's economic-growth engine is finally revving again. Take last month's retail spending as an example. It improved to the tune of 3.7% year over year versus expectations of only 3% growth, accelerating from April's pace of only 2.3%. This marks the 16th consecutive month of some degree of year over year growth.

The nation's industrial companies are picking up steam as well. While last month's industrial output fell short of expectations of 6%, its growth pace of 5.6% is still quite healthy.

All told, S&P Global Market Intelligence now believes China's GDP will expand 4.8% this year, led by exports. That's up from its previous growth estimate of 4.6%. It's also growth that's expected to linger into next year.

Largely unnoticed by investors is the fact that JD.com is already capitalizing on this fresh tailwind and expects to continue doing so.

How so? Last quarter's healthy top-line growth of 7% is largely attributable to the company's deliberate effort to position itself as a low-price leader.

As CEO Sandy Xu made a point of pointing out during May's earnings call: "As our improved price competitiveness increasingly resonates with users, the growth of our user base in lower tier cities accelerated in Q1, overtaking growth in higher tier cities."

CFO Ian Su Shan added during the call that "we're confident that our 2024 full-year growth will outpace China's total retail sales of consumer goods," nodding to the benefit of its scale and reach.

Reading between the lines, JD's management team understands and utilizes the company's unique strength. That's offering lower prices than its competitors without sacrificing speed or quality of service in an inflation-riddled environment.

It's a cost-competitive edge that rivals like Tmall, Taobao, and PDD just aren't in a position to match at this time. Indeed, until March of this year, Alibaba was planning on spinning off its logistics business. The reversal of this decision may be a hint that the company knows it needs to become more competitive with JD.com rather than risk losing control of this one aspect of its e-commerce operation.

JD stock is as undervalued as JD.com is underestimated

Risks remain, of course. Chief among them is economic uncertainty, which seems more pronounced in China than elsewhere. Beijing's regulators also have something of a penchant for unexpectedly clamping down on individual companies as well as select industries. There's also the simple risk that you may not be hearing everything there is to know about a particular organization until well after the fact. JD.com is no exception to this prospect.

On balance though, with shares priced at less than nine times this year's projected per-share profits of $3.29, the potential reward here justifies the risk. Last quarter's growth pace should persist at least through next year, with earnings expected to grow at an even faster clip.

This might help: Of the 46 analysts now covering this stock, 33 of them rate it as a strong buy, while another five call it at least a buy. Their current consensus price target also stands right around $40 per share, which is roughly 40% above the stock's present price.

Even if the average investor isn't seeing better days on the horizon, the pros clearly are. You might want to take the hint.

Should you invest $1,000 in JD.com right now?

Before you buy stock in JD.com, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and JD.com wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $723,729!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 24, 2024

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.