KeyBanc Initiates Dada Nexus With Bullish Rating

Despite potential concerns around competition from community group buying players, Dada Nexus Ltd. DADA stands apart with a differentiated O2O (online-to-offline) delivery model and serves consumer demand that is distinct, according to KeyBanc Capital Markets.

The Dada Nexus Analyst: Hans Chung initiated coverage of Dada Nexus with an Overweight rating and a price target of $55.

The Dada Nexus Thesis: Apart from its unique business model, its strong supply chain and proprietary technology solutions for retail digitalization create further barriers to entry, Chung said in the note.

“We believe the opportunity for grocery retail with a RMB 9 trillion-RMB 10 trillion TAM is big enough for multiple players,” he added.

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Backed by an estimated 70% compounded annual growth rate in revenue at its JD-Daojia (JDDJ) platform, the company could achieve breakeven by 2022, the analyst said.

“High retention rate and ticket size should warrant hypergrowth in the top line and profitability in the MT,” he added.

DADA Price Action: Shares of Dada Nexus had risen by 2.7% to $42.90 at the time of publication Friday.