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Investing.com - Morgan Stanley downgraded JD.com, Inc (NASDAQ:JD) from Equalweight to Underweight on Monday, setting a price target of $28.00. The stock, currently trading at $31.79, is considered undervalued according to InvestingPro models, despite trading at a modest P/E ratio of 8.75.
The downgrade reflects Morgan Stanley’s expectation that JD.com’s revenue growth will slow to 5.6% year-over-year in the fourth quarter of 2025, with potential year-over-year declines in home appliance and electronics sales. Investors should note that JD.com is scheduled to report its latest quarterly earnings in just 3 days, on November 13.
Morgan Stanley notes that JD.com had previously benefited more than competitors like Alibaba and PDD from trade-in policies implemented since late August 2024, due to its higher exposure to home appliances and electronics in its gross merchandise value and sales mix.
The research firm projects further revenue growth deceleration to 4.4% year-over-year in 2026, citing tapering effects from the trade-in policy that will create a high comparison base starting in the third quarter of 2025. This marks a significant slowdown from JD.com’s current revenue growth of 14.47% over the last twelve months.
Morgan Stanley also expects JD.com’s continued investments in new businesses to negatively impact long-term margins and return on equity, forecasting non-GAAP net margin to decline to approximately 2.3-2.5% between 2025 and 2030, with ROE deteriorating from 20.3% in 2024 to 12.6% by 2030. InvestingPro data already shows JD.com suffering from weak gross profit margins of just 9.83%, though the company maintains strong cash reserves exceeding its debt obligations.
In other recent news, JD.com announced a collaboration with battery maker CATL and automaker GAC to launch a new vehicle, with public test drives set for late October and an official release on November 9. The company is also in discussions with banks, including HSBC Holdings Plc and Standard Chartered Plc, to secure a euro-denominated loan to fund its acquisition of German electronics retailer Ceconomy. Additionally, JD.com’s property investment arm plans to launch a Singapore-based real estate investment trust (REIT) in partnership with Swiss investment firm Partners Group and EZA Hill Property, potentially valued at over $1 billion. In analyst updates, Susquehanna has lowered its price target for JD.com to $32.00 from $40.00, citing margin pressure, though it noted the company’s accelerating growth in the second quarter, driven by strong consumer demand and expansion into new business lines. Meanwhile, Bernstein analyst Robin Zhu highlighted China’s potential as a key hub for AI innovation, emphasizing the country’s large internet user base and the availability of open-source AI models with competitive token costs. These developments underscore JD.com’s active involvement in various strategic initiatives and market expansions.
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