JD.com Stock Plunged, May JDD (JD Digital) Become the Future?
The stock price (USD 19.27) and the market capitalization (USD 27.87 billion) of JD.com were already lower than the closing price of its first day of listing four years ago, and the price itself was only one step away from falling below the initial offer price of USD 19. Would JDD, split from JD.com, be the future of the company?
JD.com is gradually losing its engines of growth
Nov 23, 2018 /EqualOcean/ - JD.com (NASDAQ: JD), China's No. 2 e-commerce company, refreshed its 52-week low price at USD 19.21, with a closing price of USD 19.27, a market capitalization of USD 27.87 billion.
According to an analysis article on The Motley Fool, the stock plunging of JD.com was actually attributed to multiple variables, such as the economic woes in China, the falling profits, and concerns about its CEO, etc., and the stock is down by 53% this year.
Furthermore, the stock price and market capitalization of JD.com was actually already lower than the closing price of its first day of listing four years ago, and the price itself was only one step away from falling below the initial offer price of USD 19. May 22, 2014, the first day of the listing of JD.com was closed with a price of USD 20.9, with a market capitalization of over US$28.5 billion.
According to the Q3 Earnings of JD.com released on Nov 19, JD.com achieved its third-quarter net income to be CNY 3 billion(USD 0.4 billion), compared to CNY 1 billion for the same period last year. However, the profit mainly resulted from the initial public offering of Farfetch, and the company started to see a decline in sequential growth, with revenue growing 21% in Q3 compared to 35.9% in Q2, and this is also down from 37.9% revenue growth in the year-ago comparable period.
What’s worse was that active user of JD.com had begun to decrease, it was the first sequential fall in annual active customers since listing, and the company gave out a downside guide, forecasting the net revenues for the fourth quarter of 2018 would be between CNY 130 billion and CNY 135 billion, representing a growth rate only between 18% and 23% compared with the fourth quarter of 2017, which also indicated a decline.
2018 must be a trying year for JD.com, forgetting whether the company had a chance to catch up Alibaba, JD.com had to face a bunch of competitive new challengers in China’s e-commerce market, such as Pinduoduo, Netease, and even startups like Miss Fresh, etc., among which, Pinduoduo’s market capitalization was USD 24.9 billion according to information on Xueqiu.com, very close to JD.com and had a great chance to exceed it.
JD.com had to find its new engine of growth.
JD Digits could be the future of JD.com
Nov. 20, 2018 /EqualOcean/ - At 2018 JDD (JD Discover) Conference, the company’s annual Digital Technology Global Discover Conference, the CEO CHEN Shengqiang (陈生强) announced that the original brand of the company JDF (JD Finance), was officially upgraded to JDD (JD Digits), the new logo and slogan was also released.
CHEN Shengqiang said that brand upgrade was the inevitable result of the company's strategic evolution as well as the expansion of its business scope.
JDD will include different business units like JD Finance, JD City (urban computing), JD Agriculture, JD Edu (campus services) and JD MO Media (digital marketing), etc. JD Finance the core business unit as always, will cover the personal service, corporate service as well as Fintech services, etc.
JDD is an independent accounting company, which was also treated as a startup, according to the Reuters, JD.com Inc’s finance affiliate (JDD) had signed binding agreements with investors to raise CNY 13 billion (USD 1.96 billion) in fresh equity at a valuation of CNY 133 billion (USD 19.8 billion), which valuation was more than double the roughly CNY 60 billion JD Finance was estimated to be worth after it was split from JD.com in mid-2017.
LIU Qiangdong (Richard, 刘强东) said in an interview around June this year: “The past decade was our first stage, now we are entering the second stage, mainly by expanding our categories of e-commerce. We will step into the third stage with a new growth curve driven by technology, and supply chain services will be the core of our new growth, in two to three years”. This indicated that the development was somehow already planned in advance.
On the other hand, besides the bigger story and imaginary space, the upgrade form JDF to JDD might also stem from the consideration of “De-financialization”, the financial industry was a strongly regulated industry which might be influenced a lot by the policies which might be uncertain in the future. Meanwhile, to embrace the digital economy era will definitely be a good idea for JDD, especially this concept was repeatedly encouraged by the government.
With consideration of JD.com’s downward trend, JDD somehow must shoulder the responsibility as the new engine of growth, as soon as possible, as Founder and CEO LIU Qiangdong wished.
- Author: ZHANG Fan; Write to ZHANG Fan at ZhangFan@EqualOcean.com