Buying JD.com and Pinduoduo shares could be a good deal thanks to the continued growth of e-commerce. The broker Bernstein has started the coverage on the two Chinese companies with Outperform recommendation, the report reads: “(the companies are) capable of accessing a generous capital market, with a huge mass of data available and a direct line with consumers, and have shown that they know how to create new markets”.
One of the sectors that will emerge strengthened from the pandemic will certainly be online commerce because many small and large companies have been able to invest and strengthen themselves to meet the purchase needs of citizens locked in their homes due to lockdown. This is a worldwide trend, but the growth of the e-commerce sector in China is truly impressive. The American broker Bernstein noticed this, and in a January 25 report on the development of internet activities in China, he said that there is an “irresistible force of onlinification”.
With this study, Bernstein initiated the analysis of various companies operating in China, such as JD.com and Pinduoduo, the managers of the country’s main e-commerce platforms, in constant competition with each other and with the leader AliBaba. For both the recommendation is Outperform, the stocks are expected to do better than the reference market.
Ecommerce on the rise: JD.com and Pinduoduo stocks are good investments, not just Amazon
On Wall Street there is an indicator that reflects this trend, it is the ProShares Online Retail ETF, which in the last year has risen by 115%. The main component of the ETF basket is Amazon, with a weight of approximately 21%. Interestingly, this ETF has risen 41% over the past six months, despite the fact that the Amazon stock price has remained close to $ 3,200.
So it was the other e-commerce operators who led the sector rally, which represents a substantial change compared to the past. For years, in fact, investors have been reluctant to focus on emerging e-commerce groups, convinced that they could not withstand the fierce competition from Amazon.
Pinduoduo and JD.com shares, excellent growth prospects
Among the stocks that have posted the best increases in 2020 are Pinduoduo (+ 372%) and JD.com (+ 140%). About these companies in Bernstein’s research we read: “Capable of accessing a generous capital market, with an enormous mass of data and a direct line to consumers, these companies have shown that they know how to create new markets”.
And again: “We expect them to continue to do better than their competitors and we foresee strong growth for them in the most significant markets”. As for the development potential of e-commerce in China, the forecast is that the gross merchandise value, that is the total value of goods sold, will rise between now and 2025 at an annual growth rate of 17.8%.
For Pinduoduo, whose shares are traded on the Nasdaq with current prices close to $ 166, Bernstein has set a target price of $ 210, which is significantly higher than the analyst’s consensus of $ 102 (twelve Buy and four Neutral recommendations) . For Bernstein, therefore, the stock can still rise by 26%.
JD.com enjoys analyst unanimity with fifteen Buy recommendations. The average target price for the ADR traded on the Nasdaq is 60 dollars, the current price is close to 90 dollars.