On Thursday, Morgan Stanley maintained its Equalweight rating on JD.com, Inc. (NASDAQ:JD) with a steady price target of $27.00. The firm anticipates a potential decline in the company's share price over the upcoming 30 days. This outlook follows JD.com's announcement that it repurchased a significant number of shares in March 2024.
JD.com disclosed that it had bought back approximately 43.8 million American Depository Shares (ADS) for a total of $1.2 billion in March 2024. The repurchase represented around 11% of JD's trading volume, combining ADR and H-share activity, from March 8 to March 31.
This period commenced after the company released its fourth-quarter results for 2023, which allowed it to initiate the buyback program. This action is credited with supporting JD.com's share price, which saw an increase of 14.2% during that time, outperforming competitors such as Alibaba (NYSE:BABA) and Pinduoduo (NASDAQ:PDD).
However, JD.com has entered a blackout period ahead of its first-quarter results for 2024, expected in mid-May, preventing further share repurchases. Morgan Stanley forecasts that JD Retail's revenue growth for the first quarter of 2024 will be 6.1% year-over-year, which falls short of the 11.6% year-over-year growth seen in online retail sales of goods.
The firm assigns a "very likely" probability, estimated between 70% to 80%, to the scenario where JD.com's share price might drop due to the factors mentioned. These probabilities are based on Morgan Stanley's subjective assessment of how likely the scenario is to occur.
InvestingPro Insights
As JD.com maneuvers through its blackout period with anticipation of its first-quarter 2024 results, investors can glean additional insights from InvestingPro data and tips. The company's adjusted market capitalization stands at $39.46 billion, with a forward-looking P/E ratio (as of the last twelve months ending Q4 2023) of 10.65, suggesting a more attractive valuation compared to the broader market. Furthermore, its revenue growth for the same period was 3.67%, reflecting a steady increase despite the competitive landscape.
InvestingPro Tips highlight JD.com's financial prudence, noting that it holds more cash than debt on its balance sheet, which could provide a cushion against market volatility. Additionally, the company is recognized as a prominent player in the Broadline Retail industry and is trading at a low revenue valuation multiple, which may appeal to value investors. On the flip side, analysts have revised their earnings expectations downwards for the upcoming period, and the company suffers from weak gross profit margins.
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