We issue a BUY recommendation on JD.com. (JD.O) based on a one-year target price of $60.00, offering a 38.12% upside potential from its closing price of $43.44 on April, 30th, 2020. Our recommendation is primarily driven by:
- Macroeconomic Outlook – The macro outlook for Chinese e-commerce giant JD.com (NASDAQ:JD) is actually quite strong. While the coronavirus outbreak has been a tragedy, especially for China, fear about the outbreak is starting to abate. That’s because realistic hopes for a cure have arisen and investors are internalizing that, thankfully, the disease’s mortality rate is quite low compared with other, recent epidemics. Meanwhile, the positive impact of the U.S.-China trade deal on China’s economy, along with stimulus measures recently introduced by Beijing and the rebounding European economy, have yet to be reflected in most Chinese stocks, including JD stock.
- Growth Strategy – JD Worldwide’s customer growth in 2019 has shown great potential. JD Worldwide customers have been shown to have greater consumption ability, and the platform has more young consumers and consumers from lower-tier cities than in previous years. In 2020, JD Worldwide will leverage its marketing and operations capabilities as well as premium customer service to boost customer growth. The recently launched ‘Imported Products Day’ campaign on the 15th of each month is a good example of how JD Worldwide can provide better customer experience through marketing. During the past two events in February and March, sales of JD Worldwide have more than doubled YOY.
Valuation methods indicate a current intrinsic value of $43.44 per share. JD.co. offers a long-term upside of 38.12% through strategic relocation and the ability to maintain an overall high number of customer loyalty transactions in a cost-effective manner as well as the ability to attract repeat customers to their sites.
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