JD.com (NASDAQ:JD) recently posted third-quarter numbers that beat analysts' expectations by a wide margin. The Chinese e-commerce giant's revenue grew 29% annually to 134.8 billion yuan ($18.9 billion), clearing estimates by $580 million and marking its second straight quarter of accelerating growth.

Its non-GAAP net income rose 161% to 3.09 billion yuan ($432 million), or $0.29 per ADS, beating estimates by $0.12. On a GAAP basis, which includes charges from investments and divestments, stock-based compensation, and other one-time charges, its net income fell 80% to 612 million yuan ($86 million).

JD's stock initially rallied after the report on Nov. 15, but it gave up those gains by the end of the day. Yet some investors still seem bullish on the stock, which has rebounded about 60% this year after being cut in half in 2018. Let's examine the key numbers to see if JD's stock deserves to go higher.

JD.com CEO Richard Liu.

Image source: JD.com.

Accelerating growth in customers and revenue

JD's growth in annual active customers and revenue decelerated throughout 2018 and the first quarter of 2019 as it seemingly struggled with the economic slowdown in China and competition from rival platforms like Alibaba's (NYSE:BABA) Tmall and Pinduoduo.

However, JD's annual active customers grew nearly 10% to 334.4 milion during the third quarter, marking its best growth in four quarters. 70% of those new customers came from China's lower-tier cities. Jingxi, JD's discount rival to Pinduoduo, also enjoyed a strong start near the end of the quarter.

JD's mobile monthly active users (MAUs) also grew 36% annually in September, marking its strongest mobile growth in eight months. All those numbers supported JD's strongest revenue growth in five quarters:

YOY growth

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Annual active customers

14.6%

4.4%

2.9%

2.4%

9.6%

Revenue*

25.1%

22.4%

20.9%

22.9%

28.7%

YOY = Year-over-year. *RMB terms. Source: JD quarterly reports.

During the conference call, CFO Sidney Huang noted that JD's growth rate for electronics and home appliances in lower-tier cities was "more than double" its growth in first- and second-tier cities. Huang also noted that "most" of its other top 25 product categories also "saw higher and accelerated growth rates in lower-tier cities," which boosted its GMV (gross merchandise volume) from lower-tier cities to its highest level in six quarters.

Those growth rates indicate that consumer demand remains robust across China's lower-tier cities amid the country's economic slowdown and that JD isn't surrendering those oft-overlooked markets to Pinduoduo's group-purchase platform.

In addition, investors should note that JD's accelerating revenue growth coincides with a deceleration of Alibaba's core commerce revenue over the past two quarters. This puts to bed the notion that Alibaba will render JD obsolete.

JD's autonomous delivery robot.

Image source: JD.com.

Stabilizing margins and fresh revenue streams

JD's gross margin fell 60 basis points annually (but rose 20 basis points sequentially) to 14.9%. That year-over-year decline was expected, since the company previously stated that its aggressive push into lower-tier cities would temporarily throttle its margins.

However, tighter costs controls boosted its non-GAAP operating margin 160 basis points annually (and 10 basis points sequentially) to a record high of 2.2%. The operating margin at its core JD Retail business -- which excludes the logistics unit and other smaller businesses -- also hit a record high of 3.3%.

JD's transformation of its logistics unit into a self-sustaining business that offers services to other companies also continues to pay off. 40% of its logistics revenue now comes from external customers, up from 20% just two years ago, and the unit's margins are stabilizing as it reaps the benefits from years of investments in automated warehouse robots, delivery vehicles, and drones.

Meanwhile, JD's ad revenue also rose 29% annually and accounted for 7% of its top line. That fledgling business, which mirrors Amazon's expansion into the digital ad market, could gradually evolve into another growth engine.

In short, JD's stabilizing margins and new revenue streams crush Alibaba co-founder Jack Ma's infamous claim that JD's capital-intensive business model would end in a "tragedy" and indicate that it still has plenty of room to grow.

A solid outlook and a low valuation

JD expects its revenue to rise by 21%-25% annually in the fourth quarter. That marks a slight deceleration from the third quarter, but investors should recall that JD often sandbags its guidance: It previously guided for just 20%-24% growth in the third quarter.

JD didn't offer any bottom-line guidance, but analysts expect its non-GAAP earnings to grow 25%. They also expect its revenue and earnings to grow 18% and 41% (in USD terms), respectively, next year -- which are impressive growth rates for a stock that trades at just 26 times forward earnings and less than one times next year's sales.

Simply put, JD's stock deserves to go higher, but it's weighed down by macro concerns about China's economic slowdown and the trade war. However, patient investors who accumulate shares today could be well rewarded as those headwinds dissipate.