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

JD.com Inc.’s (JD) stock is now more than 54% off its 2018 highs, and technical analysis suggests the stock may drop by 13% more. Options traders are bearish, too, and see it falling as much as 11% by the middle of March. (See: JD.com Stock Seen Plunging 10% Further.)

Analysts have been slashing their earnings and revenue estimates for the stock and are projecting weak third quarter results. (See: JD.com Seen Plunging 14% As Profits Weaken.)

JD Chart

JD data by YCharts

Weak Technicals 

The chart shows the stock is approaching technical support of around $22.80. Should the price fall below that level, the stock may drop to around $20. 

The relative strength index (RSI) is sending warning signals, too. It's been trending lower since peaking in the spring of 2017. Even with the RSI now at oversold levels around 30, the trend has not changed. It suggests that bullish momentum is leaving the stock. 

 

 

Bearish Options Bets

The $24 puts for expiration on March 15 suggest the stock will drop to around $21. At that strike price, the number of bearish puts outweighs the bullish calls by a ratio of almost 4 to 1. 

Reducing Estimates

Analysts have lowered third-quarter earnings estimates by about 4% over the past month and now see earnings falling by more than 32%. Revenue estimates have also dropped. 

JD EPS Estimates for Current Fiscal Year Chart

JD EPS Estimates for Current Fiscal Year data by YCharts

JD.com's earnings outlook has darkened significantly. Analysts now estimate earnings will fall by 28% this year, a reversal from earlier estimates that profits would rise 21%. If those earnings estimates fall further, that likely will spur further declines in the stock.

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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