One of China's leading e-commerce platforms has caught the attention of JPMorgan analysts, who believe the stock is currently undervalued and poised for a significant rebound.
In their note to clients, JPMorgan upgraded JD.com (NASDAQ:JD) to Overweight and set a new price target of $36 per share (or HK$140) up from $33, indicating more than 30% potential upside for the stock.
The investment bank highlighted that JD.com's strategy and valuation have reached a critical inflection point, making it "too cheap to ignore," even with the company's conservative growth outlook.
Analysts noted that the company's shift in strategy, focusing on its strengths rather than competing on price alone, has already begun to improve its operating margins.
"We now see its adjusted operating/net margin reaching 4%+ in 2H24 and onward," JPMorgan stated, emphasizing the sustainability of these margins due to JD's refined approach.
While revenue growth has been modest, with only a 1% year-over-year increase in Q2 2024, JPMorgan expects improvement in the second half of the year.
The firm forecasts revenue growth to accelerate to 3-4% YoY in 2H24, supported by ongoing e-commerce penetration and favorable comparisons.
Despite the conservative growth outlook, the stock's current valuation at 6x 2025 estimated earnings is seen as overly pessimistic by the bank.
JPMorgan believes the market has overreacted, pricing in "no growth," which they argue is far from JD.com's reality.
JPMorgan sees JD.com as a compelling investment opportunity, with a favorable risk-reward profile, driven by improved profitability and a more focused business strategy. "We believe JD's strategy adjustment and valuation have reached an inflection point for the stock to outperform in the next 6-12 months," declared the bank.