Citi cuts JD.com stock price target to $51, maintains Buy rating

On Monday, Citi analysts adjusted their outlook on JD.com, Inc (NASDAQ:JD), reducing the price target to $51 from the previous $56 while retaining a Buy rating on the company’s shares. The revision follows a significant increase in order volume for the company, which doubled from 5 million to 10 million within a span of 10 days, indicating a strong push into the food delivery sector. According to InvestingPro data, JD.com currently trades at an attractive P/E ratio of 8.8x, suggesting potential undervaluation for this $46.8 billion market cap company.

The price adjustment comes amid a noticeable decline in JD.com’s and Meituan’s share prices, which have fallen 6.3% and 22% respectively over the past week, and 6.5% and 20.2% over the past month. This trend reflects investor concerns about the potential impact on profitability due to JD.com’s recent strategic moves in the food delivery space. Despite these concerns, InvestingPro analysis shows the company maintains strong financial health with a robust balance sheet, holding more cash than debt.

Citi’s analysis suggests that JD.com’s hiring of Qing Guo, a seasoned executive from competitor Meituan, in early 2024 was a strategic move to counteract threats to its core retail business from Meituan’s Insta-shopping service. Despite uncertainties regarding the sustainability of this growth in order volume, especially once subsidies are reduced and normal merchant commission fees are reinstated, Citi analysts believe JD.com’s strengths in first-party supply chain and logistics position it well for expansion into food delivery and on-demand retail.

The analysts highlighted the benefits of this expansion for JD.com, including higher transaction frequency, opportunities for cross-selling, and an effective channel for acquiring new users. Despite the downward revision in the company’s price target, the firm’s outlook remains positive, as evidenced by the maintained Buy rating.

In other recent news, JD.com has announced plans to hire 100,000 full-time riders over the next three months to bolster its food delivery services, intensifying competition with market leader Meituan. This decision follows a rival’s move to prevent riders from accepting JD.com delivery orders, prompting the company to ensure sufficient orders for affected riders and explore job opportunities for their partners. In a separate development, BofA Securities has adjusted its outlook on JD.com by lowering the stock price target from $51.00 to $48.00 while maintaining a Buy rating. BofA anticipates JD.com to report a 12% year-over-year increase in total revenue for the first quarter of 2025, reaching RMB 292.2 billion, slightly above consensus estimates. The growth is attributed to a 12% rise in direct sales revenue, with electronics and home appliances sales up by 14% and general merchandise sales by 10%. Additionally, marketplace, logistics, and other services revenues are expected to grow by 12% year-over-year. BofA forecasts a group non-GAAP net profit of RMB 11 billion for JD.com, indicating an 8% increase over consensus estimates. Meanwhile, Chinese authorities have requested e-commerce platforms, including JD.com, to stop requiring vendors to offer refunds without product returns by July, aiming to reduce financial pressure on merchants. JD.com has not commented on this regulatory development.

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