JD.com Stock Plummets 10% on Walmart Sellout

8月21日

Key Points:
- Walmart to sell its 9.4% stake in JD.com (JD), raising up to $3.74 billion.
- The move aligns with Walmart’s strategy to focus on its core Chinese operations, including Walmart China and Sam’s Club.
- JD.com’s shares plummet over 10% in Hong Kong following the announcement, highlighting the fragility of Chinese tech stocks.

Walmart’s Move
In a significant strategic shift, Walmart has confirmed its intention to sell its 9.4% stake in Chinese e-commerce giant JD.com. (JD) The decision, which could raise up to $3.74 billion, underscores Walmart's renewed focus on strengthening its core operations in China, specifically its Walmart China and Sam’s Club brands. This move marks the end of an eight-year partnership between the two retail giants, a relationship that was once seen as a gateway for Walmart to tap into China’s burgeoning e-commerce market.

Walmart’s decision to divest from JD.com (JD) comes as part of a broader strategy to redeploy capital towards other priorities. A spokesperson for Walmart told CNBC, "This move allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities." Despite the sale, Walmart emphasized its commitment to maintaining a commercial relationship with JD.com, reflecting the value both companies have seen in their partnership over the years.

Impact on JD.com
The announcement had an immediate and severe impact on JD.com’s stock price. Shares of JD.com plummeted over 10% in Hong Kong and fell 9.5% in after-hours trading in the U.S., making it the largest loser on Hong Kong’s Hang Seng Index. The sharp decline highlights the vulnerability of Chinese tech stocks, which have been battered by market volatility and economic uncertainties.

The sale of Walmart’s stake in JD.com (JD) is being priced between $24.85 and $25.85 per share, representing a discount of up to 11.8% compared to JD.com’s closing price in the U.S. on Tuesday. This pricing strategy signals the challenges JD.com faces in maintaining investor confidence amid a rapidly changing economic landscape in China.

The End of an Era
Walmart first acquired a 5% stake in JD.com (JD) in 2016, entering into a strategic alliance that was expected to benefit both companies. For Walmart, the partnership was a way to tap into China’s fast-growing e-commerce market, while JD.com (JD) gained access to Walmart’s extensive retail expertise and global supply chain.

Over the years, Walmart increased its stake in JD.com (JD), reaching 9.4% by March 31, 2023, with over 289 million shares. However, the economic environment in China has shifted dramatically since the partnership began. The once-promising alliance has delivered diminishing returns as JD.com struggled to maintain its growth trajectory amid a challenging market environment for Chinese tech companies.

JD.com’s recent earnings results for the June quarter showed only a 1.2% growth in revenue, reflecting the difficulties the company faces in sustaining its momentum. The company's market value has halved since early 2022, a stark indication of the challenges it now faces.

Walmart’s Future in China
Walmart’s decision to sell its stake in JD.com (JD) reflects a broader trend among multinational corporations to reassess their investments in China amid growing economic and regulatory challenges. By focusing on its core Chinese operations, Walmart aims to strengthen its position in the country’s retail market, particularly through its Walmart China and Sam’s Club brands, which continue to perform well.

The sale of JD.com (JD) shares will provide Walmart with significant capital that can be redeployed to enhance its retail operations in China, invest in new technologies, and pursue other strategic priorities. While the sale marks the end of an era for Walmart and JD.com, it also signals a new phase for both companies as they navigate the complexities of China’s evolving market.

Technical Outlook
At the time of this writing, shares of JD.com (JD) are experiencing a notable decline, having dropped 7.9% during the premarket trading session on Wednesday. This decline has resulted in a relatively weak Relative Strength Index (RSI) reading of 48, which suggests some underlying weakness in the stock's momentum. When examining the daily price chart, there is a distinct gap down that has formed, signaling a robust bearish reversal pattern, which raises concerns for investors. Should the stock price continue to depreciate and fall below its one-month low, this movement could trigger a considerable amount of selling pressure from traders and investors alike, potentially resulting in further erosion of JD.com’s stock value.

Moreover, it is important to note that JD.com (JD) is currently trading below its 50-day, 100-day, and 200-day Moving Averages (MA), which further consolidates a bearish outlook for the stock. This positioning below these crucial moving averages is often interpreted by market participants as a sign of ongoing weakness, leading to a lack of investor confidence and potentially prompting more sellers to enter the market. The combination of these factors paints a challenging picture for JD.com as it navigates these troubling market conditions.

Conclusion
Walmart’s decision to sell its stake in JD.com (JD) is a calculated move that reflects the company’s strategic priorities and the shifting economic landscape in China. As JD.com (JD) faces increasing challenges in maintaining its growth, Walmart’s focus on strengthening its core Chinese operations could position the retail giant for sustained success in one of the world’s most dynamic markets. The implications of this sale will be closely watched by investors and market analysts as both companies chart their respective futures in a rapidly changing environment.