Why JD.com Stock Was Gaining Today

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What happened

Shares of JD.com (NASDAQ:JD) were gaining today on two separate news items. China’s state post bureau issued the country’s first standard for unmanned aircraft delivery, more often known as drone delivery, and Alibaba Group Holding shares appeared to be reaching a detente with the Chinese government after it began an antitrust investigation into the e-commerce giant last week.

As of 3:11 p.m. EDT, JD stock was up 5.2%.

Image source: JD.com

So what

First, China appears set to permit drone delivery starting at the beginning of 2021 as a new policy formulated by JD, EHang, and ZTO Express will go into effect. According to a press release put out by EHang, drones of up to 255 pounds, carrying up to 75 pounds of packages, will be allowed to fly at a speed of up to 60 miles per hour.

The announcement opens up a potentially lucrative delivery market for JD as it has been investing in drone delivery for years. Permitting drones would also help the company better serve China’s rural provinces. 

Separately, investors seemed to flock back to Chinese stocks in general as Alibaba shares moved higher. China wants Alibaba’s Ant Financial subsidiary to behave more as a regular bank and is also considering taking a larger stake in Jack Ma’s businesses, including Alibaba. Though those actions may constrain Alibaba’s growth, it also means that the worst-case scenario of a breakup or a severe crackdown, as some had feared last week, is off the table.

Now what

For JD, both news items are a win for the company. It has some of the most highly evolved logistics technology of any company in the world, including a warehouse that runs with just four people and autonomous vehicles on the road in Changzhou. The new drone delivery protocol should help it advance its drone delivery capabilities, potentially giving it a competitive advantage on a global scale.

Similarly, JD and Alibaba both trade at discounts as Chinese stocks but the developments in the Alibaba story indicate that the worst fears of China are often overblown. In fact, companies like Alibaba and JD are necessary for China to advance its technological and economic development goals so the government is unlikely to do anything to significantly damage these growth stocks. Both items put JD on strong footing heading into 2021.