JD.com: Burry's Contrarian Bet on China's E-Commerce Resurgence

In a world of geopolitical tension and regulatory uncertainty, few investors are as contrarian as Michael Burry. The founder of Scion Asset Management has long been known for identifying overlooked opportunities in volatile markets. Among his current portfolio holdings, JD.com (NASDAQ: JD) stands out as a strategic bet on China’s e-commerce sector—a sector that has defied skeptics to deliver eye-popping returns.

While Burry reduced his JD stake by 40% in Q4 2024, the stock remains his third-largest holding, representing 13.43% of his $77.4 million portfolio. This position underscores a conviction that JD’s operational strengths and China’s economic recovery could unlock significant upside. But is this a risk worth taking, or is Burry’s faith misplaced?

Why Burry Still Believes in JD

Burry’s continued stake in JD reflects a deep-seated belief in its logistics dominance and value-driven strategy. The company’s sprawling supply chain—anchored by JD Logistics—has become a moat against rivals like Alibaba and Pinduoduo. As of late 2024, JD’s network included over 1,600 warehouses and partnerships with governments in key provinces, enabling same-day delivery to 85% of Chinese counties. This infrastructure isn’t just a cost advantage; it’s a competitive edge in a market where 60% of consumers prioritize delivery speed.

Financially, JD has also outperformed expectations. Despite macroeconomic headwinds, its Q3 2024 revenue rose 5.1% year-over-year to $37.1 billion, with net income surging 47.8% to $1.7 billion. Analysts note that JD’s non-GAAP operating margin of 4.5%—up from 3.2% in 2023—reflects cost discipline and economies of scale.

The Bull Case: China’s Stimulus and JD’s Positioning

The Chinese government’s 2024 stimulus measures, including infrastructure spending and tech sector reforms, have been a tailwind for JD. The company’s expansion into rural markets—where it now serves 90% of counties—aligns with Beijing’s push to boost domestic consumption. Meanwhile, JD’s trade-in programs for electronics, which now cover 200+ product categories, tap into a growing demand for affordable upgrades.

Technical traders would note that JD’s stock has risen 79.8% over the past year, outperforming the NASDAQ by a wide margin. Analysts like Citi’s Alicia Yap have raised price targets to $51, implying a 43% upside from recent levels. This optimism isn’t unfounded: JD’s forward P/E of 9.44 and P/S of 0.40 suggest the market has yet to fully price in its growth potential.

The Risks: Regulatory and Geopolitical Crosswinds

Burry’s reduction in JD’s stake—and his broader trimming of Chinese tech holdings—reflects a cautious stance toward systemic risks. Regulatory scrutiny of data privacy and antitrust laws could still disrupt JD’s business model. Meanwhile, U.S.-China trade tensions, including tariffs on Chinese goods, have weighed on investor sentiment.

Analysts also point to JD’s reliance on consumer spending, which has been uneven amid China’s post-pandemic recovery. A slowdown in discretionary purchases could hit margins, though JD’s $27.2 billion in cash reserves provide a buffer against such shocks.

Conclusion: A Risky but Rewarding Contrarian Play

JD.com is far from a sure bet, but Burry’s partial exit and lingering stake highlight a calculated risk-reward calculus. The company’s logistics scale, government partnerships, and valuation discounts make it a compelling long-term play on China’s e-commerce growth.

Consider these key data points:
- Margin Improvement: JD’s non-GAAP net margin rose to 4.5% in Q3 2024, up from 3.2% in 2023.
- Valuation Discount: A P/E of 9.44 vs. Alibaba’s 12.3 and Pinduoduo’s 18.9.
- Cash Flow Strength: $4.47 billion in free cash flow (TTM) and a net cash position of $14.67 billion.

For investors willing to bet on China’s recovery and JD’s execution, the upside could be substantial. But with geopolitical risks and regulatory uncertainties lingering, this is a stock for those with a long-term horizon—and a stomach for volatility.

As Burry himself might say: “The market is pricing in the worst-case scenario. If China’s economy stabilizes, JD’s logistics and brand could deliver outsized returns.”

Final verdict: Hold for the long game—but keep an eye on trade tensions.