Why JD.com's Stock Fell 13% Lower Last Month

MarketsMotley Fool

What happened

Shares of JD.com (NASDAQ: JD) fell 12.7% in August of 2018, according to data from S&P Global Market Intelligence. The Chinese e-commerce titan failed to impress investors with its second-quarter earnings report.

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So what

JD's adjusted second-quarter earnings of $0.05 per American Depositary Share was only half of the year-ago period's bottom-line take, although net revenues rose 31% year over year to land at $18.5 billion. Analysts had been expecting a flattish earnings performance of $0.10 per ADS.

Now what

The soft earnings line was a direct result of JD boosting its R&D budget by 80% above the year-ago period's reading. The company is working on advanced supply chain and logistics management tools and is already reselling these services to other Chinese retailers and e-tailers.

In my view, that's a solid investment in this tech-heavy company's long-term future, and no reason at all to drop share prices nearly 13% lower. But that's what we've got, so this might be a good time to consider starting an investment position in JD.com. All told, the stock is trading 36% lower in 2018, and you can pick up shares for the low, low price of 18 times JD's free cash flow.

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Anders Bylund 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.