Attention Contrarians: This Analyst Says JD.com Set Up Could Be In Your Favor

2017 has proven to be a solid year for JD.Com Inc(ADR) JD investors with the stock up nearly 60 percent. Heading into 2018, there are some near-term concerns that investors should be aware of but shares should continue moving higher over the longer-term, according to some analysts.

The Analyst

MKM Partners' Rob Sanderson maintains a Buy rating on JD's stock with an unchanged $51 price target.

The Thesis

JD.com's bulls were left "breathing a sigh of relief" after the company's third quarter earnings report while bears were left "frustrated" by the quarter, Sanderson said in a note. While the bears are also pointing to the fourth quarter as being a "true test," the analyst does see some reason for concern in the quarter but the longer-term picture is favorable.

Specifically, JD faces third-party headwinds which creates an "uncomfortable set-up" for the fourth quarter as third-parties are "key to the margin story," the analyst said. But over the longer-term, JD should be able to benefit from the large number of Chinese consumers who prefer JD's direct-seller business model and the overall Chinese e-commerce space is certainly large enough to support more than one player.

"We think that the clean Q3 should ease competitive concerns somewhat, but this will still be an overhang on the stock until Q4 dynamics and impact to the financials are better understood," the analyst said. " We do think this should be enough for the stock to regain the post-Q2 recovery levels in the mid-$40 range."