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JD.com: How High Can its Share Price Go?By Isabella Zhong
JD.com (JD) has added another 6% to its share price since the Chinese e-commerce giant’s announcement of its first-ever non-GAAP net profit earlier this month.
Analysts have on average lifted their earnings estimates for JD.com by 62% for fiscal 2017 and 138% for fiscal 2018. Target prices have risen too. The average target price on JD.com shares is now $42.99 a share compared to $$35.63 a share a month ago. The stock currently trades at $41.02 a share.
DBS Vickers analyst Susanna Chui is bullish on JD.com’s prospects.
We like JD as it is the second largest B2C e-commerce platform in China, with a market share of 25% in terms of transaction value in 2016, and annual active customers of 237m (based on 1Q17 data). We believe the company is on track to close the gap with Tmall in terms of number of active customers and spending per customer.
We expect JD’s average annual spending per customer to grow by 7% CAGR during FY16-19F, due to category expansion. Its development in the lowly penetrated fast-moving consumer goods (FMCG) segment offers potential upside. JD has invested in Yonghui Supermarket and Wal-Mart’s Yihaodian. As JD’s third-largest shareholder, Walmart could enhance collaboration efforts.
Chui has a buy rating on JD.com and has lifted her target price from $38 a share to a generous $46.80 a share, which implies 14% upside.
JD.com shares aren’t cheap at an eye-watering
354 times forward earnings. The next big test for the stock is whether it can remain in the black with its non-GAAP (or pro forma) earnings, as well as whether it can sustain its margins and the strong momentum in its top line. JD.com is expected to announce June quarter results in early August.
It seems some of the smart money has opted to trim their bets before test day. A source has highlighted to Barron’s Asia that Hillhouse Capital – JD.com’s largest institutional shareholder – sold 18 million shares last week. The fund has offloaded a total of 35.7 million shares this year, which has reduced its holdings from 114.66 million shares at the end of last year to a current 78.9 million shares.
Source: Barron's Asia
http://www.barrons.com/articles/jd-com- ... yptr=yahoo
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