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On Wednesday, Mizuho (NYSE:MFG) Securities updated its outlook on JD.com, Inc (NASDAQ:JD), adjusting the company’s price target to $48, a decrease from the previous $50. Despite this change, the firm maintains an Outperform rating on the stock. According to InvestingPro data, JD.com currently trades at $37.25 and shows signs of undervaluation based on its Fair Value analysis. The company maintains a "GREAT" overall financial health score of 3.3 out of 5, suggesting strong fundamental positioning. The revision follows JD.com’s report of a robust quarter, showcasing a significant 20% year-over-year increase in user growth and a notable uptick in revenue growth.
JD.com exceeded expectations with a 14% beat on consolidated operating income, indicating strong performance across various key product categories, including electronics, supermarket items, and fashion. These results suggest the company has made considerable market share gains. InvestingPro data reveals the company trades at an attractive P/E ratio of 8.78x and generated revenue of $165.3 billion in the last twelve months, with an 8.9% growth rate. For deeper insights into JD.com’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. However, the company’s management has chosen to reinvest in expanding its on-demand services, which are complementary to its core commerce operations. This strategy is anticipated to put short-term pressure on profit margins.
Despite the promising trajectory for top-line growth, with no expected contribution from food delivery in the fiscal year 2025, Mizuho has revised its EBITDA forecasts for JD.com. The firm has decreased its EBITDA projection for fiscal year 2025 by 7% and for fiscal year 2026 by 5%. The new price target of $48 is grounded on a 7x multiple of the company’s estimated EBITDA for fiscal year 2026. Current EBITDA stands at $7.1 billion, with the company maintaining strong cash flows that sufficiently cover interest payments. While gross profit margins remain relatively low at 9.88%, JD.com holds more cash than debt on its balance sheet, demonstrating financial prudence.
The investment in on-demand offerings aligns with JD.com’s broader business strategy, which aims to create synergies with its primary commerce operations. While these investments may impact margins in the near term, Mizuho’s analysis indicates confidence in JD.com’s long-term growth potential and market position. The Outperform rating suggests that Mizuho continues to see JD.com as a stock likely to outperform the broader market or its sector in the foreseeable future.
In other recent news, JD.com has reported strong first-quarter results, with non-GAAP net profit growth of 43% year-over-year, reaching Rmb12.8 billion. This performance exceeded both Citi’s and Bloomberg’s consensus estimates, leading to an increase in price targets from Citi and Jefferies, who now set them at $52 and $66, respectively, while maintaining Buy ratings. Morgan Stanley (NYSE:MS), however, lowered its price target to $39, citing concerns over the lack of guidance in JD.com’s food delivery segment but maintaining an Equal-weight rating. The company’s expansion into food delivery has been met with high daily order volumes and positive customer feedback, although management has not provided specific guidance on its financial impact.
Citi analysts noted a significant increase in JD.com’s order volume, which doubled in just 10 days, and highlighted the company’s strategic hiring of Qing Guo from competitor Meituan. Despite these positive developments, Citi reduced its price target to $51, reflecting investor concerns about profitability in the food delivery venture. Jefferies emphasized JD.com’s continued growth in active customers and Gross Merchandise Volume, suggesting potential synergies in local on-demand services. Meanwhile, Goldman Sachs removed JD.com from its Asia-Pacific Conviction List, reflecting changing market dynamics and growth prospects.
JD.com has raised its guidance for 2025, anticipating double-digit growth in both revenue and earnings, which Morgan Stanley views as a positive trigger. The company remains focused on enhancing efficiency and expanding its retail and technology services. Analysts’ updates offer investors varied perspectives on JD.com’s future, with some expressing confidence in its strategic direction and others highlighting potential risks in its new ventures.
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