On Monday, Citi updated its stance on Dada Nexus Ltd . (NASDAQ: NASDAQ:DADA), increasing the price target to $2.00 from the previous $1.50, while holding a Neutral rating on the shares. The adjustment reflects Citi's anticipation of a steady performance in the company's upcoming third-quarter 2024 earnings report, expected around mid-November.
The firm's forecast remains unchanged, predicting an earnings report that aligns with expectations, propelled by a robust 38% year-over-year growth in Dada Now. This growth, however, is somewhat tempered by a 42% year-over-year decline in JD (NASDAQ:JD) Now, which continues to feel the effects of ongoing transition processes.
Looking ahead to the fourth quarter of 2024, Citi analysts suggest that a deeper partnership with JD.com is likely to bolster the demand for JD Now services. Additionally, the sustained structural growth in on-demand needs is expected to continue driving solid year-over-year growth for Dada Now, estimated at 28% for the fourth quarter.
The revision in the price target is also influenced by the recent removal of market uncertainties following the complete divestiture of Walmart (NYSE:WMT)'s stake in Dada Nexus. Consequently, Citi has increased the price-to-sales (P/S) target multiple to 0.35 times, up from 0.3 times, while rolling forward to the 2025 revenue estimates.
Citi's updated price target comes with the expectation that it may take several more quarters for Dada Nexus to fully recover from the transition impact. Despite the potential for growth and improvement in the coming months, the firm maintains a cautious stance with a Neutral rating, signaling a wait-and-see approach regarding the stock's future performance.
In other recent news, Dada Nexus Ltd. has been experiencing significant momentum in its operations, as highlighted by the company's recent Q2 results. The company's revenue and non-GAAP earnings surpassed consensus expectations, a development that Jefferies, an investment firm, has noted with interest. Jefferies has reiterated its Buy rating on Dada Nexus, maintaining its revenue and non-GAAP earnings projections for the company through 2024.
Dada Nexus's Q2 results showed revenue of RMB2.35 billion, beating the consensus estimate of RMB2.28 billion. The adjusted net loss per share was also less than anticipated, coming in at RMB0.14 compared to analyst expectations of a RMB0.23 loss per share.
Among the recent developments, Dada Nexus's collaboration with JD and the expansion of Dada NOW's coverage of key accounts have been key in driving its current momentum. The company's management team has emphasized the rapid growth in transacting users and orders for JD NOW, citing low market penetration as a driving factor.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Dada Nexus Ltd.'s financial situation and market performance. The company's market capitalization stands at $452.06 million, reflecting its current position in the Consumer Staples Distribution & Retail industry. Notably, Dada Nexus has experienced significant price volatility, with a striking 72.9% return over the past month, contrasting sharply with a 55.64% decline over the past year.
These fluctuations align with two key InvestingPro Tips: "Stock has taken a big hit over the last week" and "Stock generally trades with high price volatility." This volatility underscores the challenges and opportunities facing Dada Nexus as it navigates its transition period and seeks to capitalize on the growth of Dada Now and the potential recovery of JD Now.
Additionally, InvestingPro highlights that Dada Nexus "Holds more cash than debt on its balance sheet," which could provide financial flexibility as the company works towards recovery and growth. For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Dada Nexus, providing deeper insights into the company's financial health and market position.
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