Market Reacts to JD Stock Decline

By Susan Ramirez • Tuesday, October 15 10:12 • Permanent Link

With a sudden -6.2% drop to $41.41, JD.com has Wall Street wondering if its shares will keep moving past its target price of $43.02. With an average rating of buy, and analysts assigning target prices from 28.0 to 60.0 dollars per share, investors will be betting heavily on the Retail stock's next move.

The market seems to share this optimistic view, since JD.com has a short interest of only 3.3% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

We can make inferences about the market sentiment surrounding JD.com by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.

At 18.7%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.

Overall, there is mixed market sentiment towards JD.com because of an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and a very small number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about JD:

It has trailing 12 month earnings per share (EPS) of $2.8 per share
JD.com has a trailing 12 month Price to Earnings (P/E) ratio of 14.8 while the S&P 500 average is 29.3
The company has a Price to Book (P/B) ratio of 0.27 in contrast to the S&P 500's average ratio of 4.74
JD.com is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.6 and 3.19 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.