Author Topic: JD - JD.COM  (Read 47147 times)

oddballstocks

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Re: JD - JD.COM
« Reply #120 on: November 29, 2018, 11:39:42 AM »
I have always wondered when do you pull the plug on busted growth? How long until you know growth is dead or the compounding isn't happening?
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Gregmal

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Re: JD - JD.COM
« Reply #121 on: November 29, 2018, 11:40:12 AM »
Hopefully not a snarky question, but at which point do consider the investors here the thesis is broken. The last quarterly results were nothing to write home about - slowing revenue growth and the growth (25% compared to 30%+) and the improvement in gross margins has stalled too. It looks like they are falling further and further behind Alibaba.

I don’t follow this very closely, so I may have overlooked something.

Why would one quarter of data suggest a thesis is broken? Can you point to something more enduring (and concerning) suggesting the company's competitive position is actually eroding?

It’s not one quarter, it’s a string of quarters. There is no evidence that the often cited “flywheel” is actually happening. A stable gross margins is bad news, because the gross margin should have increased with the changes in merchandise and increasing service  revenue, but it doesn’t.

The gap to Alibaba is widening, not getting smaller.

The thesis IMO was flawed to begin with. This is a classic value investor investment. They want to own AMZN or BABA but are too cheap to pay up for quality so a second rate knock off version like JD with enough of an optically pleasing fundamental profile fits the bill. But at the end of the day it will always be priced at a discount to BABA and for good reason. Better off just paying for quality...

nkp007

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Re: JD - JD.COM
« Reply #122 on: November 29, 2018, 12:02:42 PM »
The thesis IMO was flawed to begin with. This is a classic value investor investment. They want to own AMZN or BABA but are too cheap to pay up for quality so a second rate knock off version like JD with enough of an optically pleasing fundamental profile fits the bill. But at the end of the day it will always be priced at a discount to BABA and for good reason. Better off just paying for quality...

Really well said.

Aqul

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Re: JD - JD.COM
« Reply #123 on: November 29, 2018, 12:17:48 PM »
BABA bulls should really take a look at the company's accounting before claiming it is "high quality."

Much of JD's CapEx currently is going towards building out the Logistics assets. So, on an FCF basis, the core JD Mall appears somewhat cheap, with free call options on JD Finance and Logistics. Moreover, JD Mall is clearly under-earning (large investments in technology initiatives, 3P delivery operating at break-even, etc.).

Obviously, it is tough to separate Mall, Finance, and Logistics, as they all support each other. I'm still doing more work on whether the SOTP analysis makes sense or not. Still, JD is starting to look interesting at these levels.

lucasnascimento

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Re: JD - JD.COM
« Reply #124 on: November 29, 2018, 04:04:15 PM »
JD story turned into a disaster this year because of the unexpected depth of Logistics losses and the much higher than expected R&D investments, which are masking the underlying margin improvement of the business. IMO, it was a execution flaw within JDL (management clearly didn't anticipate the struggle they would have in the first years of operation in convincing sellers to adopt their solution) and also there was a serious communication error, as they could have better communicated the rapid R&D ramp-up and most importantly the insane CAPEX ramp-up for this year. Core business thesis is intact (shift to 3P/Ad which are growing faster, is really driving higher margins), but JDL/R&D led to significant earnings revisions for the next 1-3 years.

Those who invested late 2017/early 2018 with the core margin improvement thesis were not wrong. Those unexpected losses, the consumption slowdown and moreover Liu's arrest (!!) have come at the same time. Really really unfortunate.

On the flipside, seems like JDL will turn profitable on a gross basis next year (from ~ -20% GM this year - bizarre margin take off) and R&D will stabilize and bear fruit in the coming quarters. Logistics moat seems mostly intact. JDL monetization fund will also begin to yield returns. From a macro level also, the only way for China is up. Consumption rebound will help 3C/electronics.

SOTP, P/Sales and P/FCF also point to significant misprice. If JD delivers 80% of FCF they did in 2017 (w/ some capex normalization and no one-offs in CFO like this year), you have a FCF Yield of 8% 2019E. Worth taking a look.
« Last Edit: November 29, 2018, 04:11:53 PM by lucasnascimento »

Aqul

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Re: JD - JD.COM
« Reply #125 on: November 30, 2018, 09:41:37 AM »
JD story turned into a disaster this year because of the unexpected depth of Logistics losses and the much higher than expected R&D investments, which are masking the underlying margin improvement of the business. IMO, it was a execution flaw within JDL (management clearly didn't anticipate the struggle they would have in the first years of operation in convincing sellers to adopt their solution) and also there was a serious communication error, as they could have better communicated the rapid R&D ramp-up and most importantly the insane CAPEX ramp-up for this year. Core business thesis is intact (shift to 3P/Ad which are growing faster, is really driving higher margins), but JDL/R&D led to significant earnings revisions for the next 1-3 years.

Those who invested late 2017/early 2018 with the core margin improvement thesis were not wrong. Those unexpected losses, the consumption slowdown and moreover Liu's arrest (!!) have come at the same time. Really really unfortunate.

On the flipside, seems like JDL will turn profitable on a gross basis next year (from ~ -20% GM this year - bizarre margin take off) and R&D will stabilize and bear fruit in the coming quarters. Logistics moat seems mostly intact. JDL monetization fund will also begin to yield returns. From a macro level also, the only way for China is up. Consumption rebound will help 3C/electronics.

SOTP, P/Sales and P/FCF also point to significant misprice. If JD delivers 80% of FCF they did in 2017 (w/ some capex normalization and no one-offs in CFO like this year), you have a FCF Yield of 8% 2019E. Worth taking a look.

Really well said.

koshigoe

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Re: JD - JD.COM
« Reply #126 on: December 05, 2018, 05:46:02 PM »
But at the end of the day it will always be priced at a discount to BABA and for good reason. Better off just paying for quality...


Oh the irony! Sounds like someone doesn't really understand either business. Perhaps you'd like to read this:
https://deep-throat-ipo.blogspot.com/search?q=baba

And what are those good reasons? Perhaps you'd like to see this:

just search back two years and you see JD taking search share from Taoabao/Tmall

http://index.sogou.com/index/searchHeat?kwdNamesStr=京东,天猫,淘宝网&timePeriodType=MONTH&dataType=SEARCH_ALL&queryType=INPUT

Why did Walmart and Google and Tencent invest in JD and not BABA? Oh because they didn't take your advice, right?

Jerry Capital

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Re: JD - JD.COM
« Reply #127 on: December 06, 2018, 05:19:18 AM »
Salty AF
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Broeb22

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Re: JD - JD.COM
« Reply #128 on: December 06, 2018, 06:17:07 AM »
Is there any significant difference between the VIEs JD uses versus the ones BABA uses?

Are there any more thorough resources on the legal structures that members of the board have come across?

koshigoe

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Re: JD - JD.COM
« Reply #129 on: December 06, 2018, 08:09:29 PM »