BofA Raises JD.com Target On Positive Industry Trends

JD.com Inc JD is poised to benefit from positive industry trends, with recent data on e-commerce and express couriers suggesting a recovery, according to BofA Securities.

The JD.com Analyst: Eddie Leung maintained a Buy rating for JD.com, while raising the price target from $60 to $70.

The JD.com Thesis: While China’s online retail sales of physical products grew 20% year-on-year in April and May, the parcel volume of couriers, most of which comprises of e-commerce, surged 37%, Leung said in the note.

He added that this growth was driven by pending demand for categories like appliances, it was also led by “continuous strong momentum” in categories like groceries, food & beverages, and fresh produce.

The analyst expects JD.com’s growth to match this trend and believes the performance can be even better due to the company’s:

• Low exposure to apparel, a category that is under pressure
• User growth in non-major cities, driven by its logistics coverage, offline partner and franchisee stores, customized factory-direct products and the JingXi app
• Strong foothold of the supermarket categories
• Ability to retain customers with better recommendations and social commerce

Since JD.com’s secondary listing in Hong Kong is expected to take place towards the end of the second quarter of 2020, the impact of the dilution may become noticeable only from the third quarter.

JD Price Action: Shares of JD.com had risen 2% to $60.76 at the time of publication Tuesday.

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