Zinger Key Points
- JD.com has been stymied by domestic competition from bigger peer Alibaba and PDD Holdings's Temu.
- Uninspiring domestic economic growth has not helped matters any further.
Retail giant Walmart, Inc. WMT has reportedly offloaded its stake in Chinese e-commerce company JD.com, Inc. JD, with the sale potentially raising $3.6 billion for the U.S. company. CNBC Mad Money host Jim Cramer commented on the slide in JD.com shares amid the development.
What Happened: A Bloomberg report, citing people familiar with the matter, said Walmart has sold 144.5 million JD.com shares for $24.95 per share. This marked an 11.5% discount from the closing price of JD.com’s Nasdaq-listed ADR ($28.19) on Tuesday. The Chinese e-commerce company’s Hong Kong-listed share ended Wednesday’s session down 8.73%.
In premarket trading on Wednesday, JD.com’s ADR traded down 7.73% at $25.99, according to Benzinga Pro data.
Cramer wondered at the kind of backlash the shares suffered on a $3-billion-block sale. “The thing down huge,” he said.
He also applauded Walmart, calling it the decision to get out as a smart move. Only Alibaba Group Holding Ltd. BABAB has any real liquidity, he said. Alibaba traded up 0.80% at $81.69 in the premarket session.
“What is the true worth of Chinese stocks,” he asked.
See Also: Best Chinese Stocks
Why It’s Important: Walmart’s decision to exit JD.com may have to do with its strategy to go solo in the world’s second-largest economy. The Bloomberg report said the Bentonville, Arkansas-based company has developed a “mature e-commerce and delivery system” in China for both Sam's Club and its hypermarkets.
On the other hand, JD.com with which Walmart partnered has been stymied by domestic competition from bigger peer Alibaba and PDD Holdings, Inc. PDD-owned Temu. Chinese companies, especially the big tech names with operations globally, are stymied by regulatory clampdowns and the slowdown seen in the domestic economy.
Last week, JD.com reported an anemic 1.2% revenue growth but managed to exceed earnings estimates due to its strategic decision to cut back promotions in the quarter amidst soft consumer demand and a competitive landscape.
Reviewing the results, Benchmark analyst Fawne Jiang said then JD.com is “highly susceptible to macro considering
their big ticket items exposure.” The analyst reduced his gross merchandise volume/revenue growth projections to factor in more conservatisms due to lack of visibility and as an extension lowered the price target estimate for the stock to $47.
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Photo: Courtesy of Scott Beale on Flickr
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