JD.com’s solid fundamentals remain intact despite Walmart’s exit (JD)

Walmart’s (WMT) surprise decision to divest its 10% stake in Chinese online marketplace JD.com (NASDAQ: JD) triggered a catching-up process in the stock, but has since stabilized as the longer-term implications for JD.com (JD) seem less serious than the spontaneous reaction suggests.

The sale ends an eight-year relationship between the two companies and highlights that Walmart (WMT) is likely looking to invest more in China, which will increase competitive pressure on JD.com (JD).

However, according to analysts at JP Morgan and Citigroup, JD.com’s (JD) solid fundamentals remain intact as the company’s sustainable relationship with Walmart (WMT) is expected to continue.

“JD has been a valued partner for us over the past eight years and we are committed to continuing our relationship with them,” Walmart said in a statement to Barron’s.

“Given the reduced sale price, the sale is a short-term negative,” says JP Morgan analyst Andre Chang. But once the shares are absorbed, fundamentals for JD.com (JD) remain positive. Investors should take this opportunity to buy shares of JD.com once the sale of shares is completed, Chang says, and that the company’s strategy adjustment and valuation “have reached an inflection point where the stock can outperform over the next 6-12 months.”

In addition, JD’s (JD) competitive advantage is “intact,” says Jefferies, and the company has particular standards for a strong supply chain and a focus on speed, quality and price.