(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

JD.com Inc.'s (JD) stock has had a terrible 2018 declining by 46%, but now options traders are betting the stock falls by 12%. Technical analysis also supports the stock dropping further in the coming weeks. 

The reason for the bearish outlook is what is forecast to be a weak third quarter for the company when it reports results on November 19. Analysts have been slashing their forecast for the company over the past few weeks while reducing their price targets.

JD Chart

JD data by YCharts

Bearish Bets

The options market for expiration on March 15 shows that the number of bearish put bets at the $22 strike price heavily outweigh the bullish call bets at a ratio of 16 to 1, with 16,000 open put contracts. A buyer of those puts would need the stock to fall 12% to $19.85 to earn a profit. 

Weak Chart

The chart also suggests the stock declines in the coming weeks. Currently, it is falling below technical support at $22.80. The next level of support on the chart would not come until $20, a decline of 11% from the current stock price of around $22.50. 

 

Estimates Drop

Analysts are forecasting earnings to drop a stunning 50% in the third quarter to $0.11 per share. That is despite revenue rising by 22% to $15.4 billion. But those estimates have fallen dramatically in recent weeks. 

Even worse, is that analysts see earnings for the full-year dropping by 39% to $0.32 per share in 2018. Meanwhile, revenue is expected to climb by 17% to $66.9 billion. Those estimates have been steadily declining since September. 

JD EPS Estimates for Next Fiscal Year Chart

JD EPS Estimates for Next Fiscal Year data by YCharts

Earnings and revenue estimates for next year and 2020 have been falling too. As a result, the average price target on the stock has dropped by 35% to $34.74 and is likely to fall even further. 

The stock continues to struggle, and its high 2019 PE ratio of 30 does not help the shares current situation either. For the JD.com to start rising again, it will need to post better than expected results and provide a positive outlook. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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