JD.com Traders Bet Stock Will Fall 12% as Earnings Plunge

Michael J. Kramer | | November 09, 2018

JD.com Traders Bet Stock Will Fall 12% as Earnings Plunge
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. 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. 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. 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.

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