We came across a bearish thesis on JD.com, Inc. (JD) on wallstreetbets subreddit page by dqzou. In this article, we will summarize the bulls’ thesis on JD. JD.com, Inc. share were trading at $39.68 as of Oct 21st. JD’s trailing and forward P/E were 14.22 and 9.97 respectively according to Yahoo Finance.
A customer using their mobile device to access financial services with the help of a customer service representative.
JD.com, a major e-commerce and financial services company, may be facing a liquidity crisis similar to the collapse of Silicon Valley Bank, driven by rapid user dissatisfaction and withdrawals. According to information circulating on Chinese social media, the issue began when JD.com hired a controversial talk-show actress as a brand spokesperson, sparking outrage among its core e-commerce users. This backlash escalated quickly, with users initiating mass refunds, leaving negative reviews, canceling memberships, and requesting invoices – a practice that could lead to tax liabilities for the company, potentially reducing its net income.
Compounding these issues, users reportedly began withdrawing funds from JD.com’s financial products. Screenshots suggest that some users faced restrictions or outright rejections on their withdrawal requests, raising concerns about the liquidity of JD’s financial arm. Despite JD.com issuing a statement denying a bank run, some users noticed that transfers from the JD finance app were now being sourced from a bank, rather than directly from JD’s financial products, further fueling fears of liquidity problems. While some claimed that multiple banks were involved, only one bank was confirmed through screenshots, leaving some uncertainty.
JD.com’s efforts to address the situation, including issuing an official apology on Weibo and sending mass text messages reassuring users that the company was not facing a bank run, seem to have backfired. These actions inadvertently increased awareness of potential risks, driving even more users to withdraw funds and leave negative reviews. Worse yet, screenshots circulated online showing chat logs where JD.com’s customer service representatives allegedly delayed refunds and, in some instances, insulted customers – with one representative reportedly cursing at a customer’s mother. This has likely exacerbated the loss of consumer trust.
While JD.com is not a pure financial company like Silicon Valley Bank and generates substantial cash flow from its e-commerce operations, the ongoing backlash and withdrawal of user funds could still have a severe impact. Even if the company avoids bankruptcy, it may lose a significant portion of its loyal user base. The reputational damage from poor customer service and the mishandling of the situation could lead to a long-term decline in both its e-commerce and financial businesses.
JD.com, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held JD at the end of the second quarter which was 52 in the previous quarter. While we acknowledge the risk and potential of JD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than JD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.