Chinese e-commerce giant JD.com reported better-than-expected revenue in the fourth quarter as rise in online shopping activity, which accelerated sharply due to the COVID-19 pandemic, continues to increase, sending its shares up over 5% on Thursday.
JD.com said its net revenues surged 31.4% to 224.3 billion yuan for the fourth quarter of 2020. Net service revenues came in at 32.1 billion yuan, up 53.2% from the same period a year ago. Net revenues for the full year of 2020 rose 29.3% from the full year of 2019 to 745.8 billion yuan, beating Wall Street’s consensus estimate of 740.81 billion yuan.
The leading B2C e-commerce player in China, which accounts for over 20% of China’s total B2C online market and over 50% of the online direct sales market, said its non-GAAP diluted net income per ADS for the full year of 2020 was CNY 10.56 per share or $1.62 per share, beating analysts estimate of $1.26 per share.
Following this upbeat result, the U.S.-listed JD.com shares, which surged about 150% in 2020, rose over 5.5% to $94.4 on Thursday.
“JD’s 4Q20 earnings beat on tax benefits, while 1P revenue growth was in-line with our expectation with decent user growth,” said Eddy Wang, equity analyst at Morgan Stanley.
JD.com Stock Price Forecast
Nine analysts who offered stock ratings for JD.com in the last three months forecast the average price in 12 months of $115.29 with a high forecast of $133.00 and a low forecast of $105.00.
The average price target represents a 25.11% increase from the last price of $92.15. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $92 with a high of $110 under a bull scenario and $62 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese e-commerce giant’s stock.
Several other analysts have also updated their stock outlook. JD.com had its target price increased by analysts at Macquarie to $133 from $107. The brokerage presently has an “outperform” rating on the information services provider’s stock. Loop Capital increased their target price to $105 from $99.
Moreover, Benchmark upped their target price to $100 from $76 and gave the company a “buy” rating. Zacks Research raised to a “buy” rating from a “hold” and set a $100.00 price target. Barclays increased their price objective to $100 from $89 and gave the company an “overweight” rating.
“JD has demonstrated strong execution in balancing growth and margin expansion. Together with its strong cash position, JD is able to expand market share amid the increasing online penetration of e-commerce. We expect JD to ride the fast-growing FMCG e-commerce trend in China in view of a low online penetration rate (3.6% in 2019). Behavioral changes in FMCG shopping during the COVID-19 pandemic should have a significant impact on e-commerce players,” Morgan Stanley’s Wang added.
“Current P/E is 26.7x 2022e non-GAAP EPS, and PEG is 1.1x. We believe this still indicates upside potential, given the long runway for margin expansion and potential growth in the online FMCG market,”
Upside and Downside Risks
Risks to Upside: Faster-than-expected margin expansion from operating leverage. Faster-than-expected growth in FMCG e-commerce and home appliances. Successful penetration in lower-tier cities, driving up user growth – highlighted by Morgan Stanley.
Risks to Downside: Adverse effects on demand for discretionary products from the pandemic. Slower-than-expected growth in home appliances and general merchandise (especially FMCG). Intensified competition.
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