JD.Com Inc (ADR) (NASDAQ:JD) is a better investment at the moment that Alibaba Group, Jeff Dorr of J Capital Research told CNBC in an interview.
The JD.Com Inc (ADR) (NASDAQ:JD) recommendation over Alibaba Group was made by the equity analyst as the latter is expected to shortly mark its initial public offering on the New York Stock Exchange.
“In our view at least, we prefer the business model of JD.com. We just feel that with an 80% market share for Alibaba at this stage, you really can only grow in line with the market. With JD.com having 20% market share, we feel that over time, there is room for JD.com to take share and maybe capture their growth,” Dorr said.
Furthermore, commenting about JD.Com Inc (ADR) (NASDAQ:JD)’s business model being similar to that of U.S. internet retail leader Amazon.com, Inc. (NASDAQ:AMZN), Dorr added that while Amazon.com, Inc. has been losing money in the past quarters, the company is notorious for spending large amounts on research and development.
This positions the company, like JD.Com Inc (ADR) (NASDAQ:JD), for longer-term growth rather than short-term gains, he said. Amazon.com, Inc. may lose money in the short term but J Capital Research thinks that the company’s business model is sustainable and will deliver significant shareholder value, Dorr added.
As for the JD.Com Inc (ADR) (NASDAQ:JD) rival expanding to other markets like the U.S. and perhaps emerging markets, Alibaba Group has room to grow, Dorr said. However, the analyst said that at this point, growth in market like Russia for the Alibaba Group is still a small portion of sales. However, he said that competition is stiffer in the U.S.
Dorr also discussed in the interview about how his firm thinks that the recent acquisitions of the Alibaba Group may not be really helpful for the company for their growth. However, he said that the money that the group will raise in its initial public offering will likely go to building a better logistics operation in China.