Why JD.com Stock Soared 62.8% in 2017

MarketsMotley Fool

What happened

JD.com, Inc. (NASDAQ: JD) stock soared 62.8% in 2017, according to data provided by S&P Global Market Intelligence. Customer additions, healthy sales growth, and a favorable outlook for the broader Chinese e-commerce market helped propel the stock to impressive gains.

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So what

JD.com shares started the year with solid momentum that was sustained by strong results for the fourth quarter of the 2016 fiscal year and promising sales guidance. The company's share price saw a big jump in May thanks to first-quarter results that were better than anticipated, with JD.com posting a 41% year-over-year sales increase and a 120% jump in free cash flow compared to the prior-year period.

The stock proceeded to hit a record high in August and then saw steep sell-offs after the company delivered second-quarter results that were coupled with sales guidance indicating the company's growth was slowing. JD published another strong earnings report in November, but shares actually traded down in the month before rebounding in December.

Now what

JD stock has gained ground in 2018 and is approaching the neighborhood of the record high it reached last year. Shares trade at roughly 50 times forward earnings estimates, but the average analyst estimate calls for earnings growth of roughly 110% in the next fiscal year, and the the company has enough compelling opportunities ahead to make it a worthwhile long-term investment candidate. The expansion of the Chinese middle class will likely continue to be a positive catalyst, and JD is one of the companies that's best-positioned to benefit as e-commerce continues to grow at a rapid clip in the country.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JD.com. The Motley Fool has a disclosure policy.

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