Shares of JD.com (JD) fell about 10% in after-hours trading yesterday after news broke that American retailer Walmart (WMT) plans to sell its stake to raise $3.74 billion. According to BloombergWalmart is reportedly offering 144.5 million ADRs (American Depositary Receipts) of JD at a price of $24.85 to $25.85 apiece. Morgan Stanley (MS) is the broker-dealer for the offering.
At the time of writing, JD’s Hong Kong-listed shares (HK:9618) fell more than 10% on Wednesday in reaction to the news.
Walmart’s surprise share sale
Walmart said it is committed to continuing its relationship with JD.com, but believes the sale of the shares will help it focus on the Chinese operations of Walmart China and Sam’s Club and channel resources into other important areas.
The Chinese retail market is facing a number of challenges, including an uncertain economic forecast, changing consumer preferences and strong competition. Against this backdrop, Walmart is trying to strengthen its own offering in the world’s largest consumer market.
Walmart is the largest shareholder in JD.com. The sale of its shares came after an eight-year partnership. In June 2016, Walmart acquired a 5% stake in JD by selling its Chinese online grocery store Yihaodian. According to JD.com’s 2023 annual report, Walmart held a 9.4% stake in the company, owning around 289 million shares.
Should you buy or hold Walmart stock?
Analysts are very optimistic about the performance of WMT stock. On TipRanks, WMT has a consensus rating of Strong Buy based on 27 buy recommendations and three hold recommendations. The average Walmart price target of $74.11 means shares are almost fully valued at current levels. Walmart stock has gained 42.8% so far this year.
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Should you buy JD or keep it?
Despite the current headwinds, JD stock also receives a consensus rating of Strong Buy on TipRanks. This consensus rating is based on 14 buy recommendations versus two hold recommendations. JD.com’s average price target of $39.56 implies an upside potential of 40.3% from current levels.
View more JD analyst ratings
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