In this briefing:
- JD.com (JD): Lawsuit Over, Price Falling Back to First Trading Day, Defensive in Bear Market
- Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.
- SPX and Asia Bear Kick Off
- Minnesotan Authorities declined to charge the founder of JD.
- JD’s stock price has already plunged 52% in 2018. We believe JD is a defensive equity for portfolios, as the NASDAQ Composite just plunged 50% at most in the financial crisis of 2008.
- Compared to 2014, today’s JD has a higher market share in the larger e-commerce market. However, JD’s stock price is at the same level as the first trading day in 2014.
- JD continued to generate operating cash inflows in 2018 as previous years despite of its zero net margins.
- We are not concerned about the programmer layoff in December, as we believe JD overly invested in “hi-tech” that will not bring revenues in the near future.
- Based on historical Price / GMV, we believe there is an upside of 270% for JD’s stock price.
The Semiconductor Industry Association (SIA) just announced that worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8% YoY, but down 1.1% MoM, the first such decline since February 2018. While the decline is modest and total 2018 total semiconductor sales are on track to reach ~$470 billion for a YoY increase of 15.7%, any decline in what should be peak holiday season is not a good sign.
Semiconductor sales historically track Wafer Fab Equipment (WFE) sales with a roughly six month time lag. North American WFE sales have been declining each month for the past six months meaning that this latest semiconductor MoM sales decline is right on schedule.
Leveraging a decade’s worth of historical data, we analyse two key questions that are likely on every investors mind. Firstly,for how long should we expect semiconductor sales to continue their decline. Secondly, how steep should we expect that decline to be?
A brief positioning sequence update as trade kicks off for 2019. Our S&P bounce sequence outlined after Christmas met our C wave target and now set for some tactical ranging before reach for new lows in Q1.
The fact that Asia could not must a rally on the back of the US 5% move higher on December 26th shed light on the bias this is resuming today after flat range patterns are breaking down.
Sell rallies remains our macro bias, however we see a tactical low shaping up next week in part of a range bounce flat pattern ahead of the bigger bear cycle due into late Q1.
Asia base case downside targets are outlined as well as fresh short resistance levels.