Has Wall Street gone a bit overboard punishing JD.Com Inc (ADR) (NASDAQ:JD)? The online retail firm’s share price fell nearly 5% Friday on the heels of a disappointing fourth-quarter report. JD reported a bigger-than-expected loss and predicted slow profit margin growth in 2018 as it bets on building logistics infrastructure, expands into retail stores and ramps up its marketing spending.
Stifel’s top analyst Scott Devitt commented, “We believe the initial negative reaction in JD.com’s share price likely reflects the modest upside in 4Q results and the heightened level of investment in multiple areas (which we support) including logistics, new businesses, technology, and promotions, limiting margin. Nothing in today’s report changes our positive view on the company. JD is early in scaling its retail franchise and we believe investment in the platform is necessary to grow market share.”
“Later this year JD may look to grow cross border sales to serve Chinese consumers abroad, though no definitive plans have developed yet. Similar to most other companies in our eCommerce coverage universe, JD is investing in areas to strengthen its competitive position. We are comfortable with where investment dollars are focused. We maintain our favorable view as we believe JD is well positioned to grow share in the rapidly growing China eCommerce market and expand margin over time,” the analyst added.
As such, Devitt reiterates a Buy rating on JD shares, while slightly raising the price target from $54 to $55, which implies a potential upside of 26% from today’s closing price.
Devitt’s picks have a 25.7% one-year average return with a 64% success rate, according to analyst ranking service TipRanks, placing him in the top 50 among all Wall Street analysts.
If we turn to the Street in general, we can see that the stock also has a BUY analyst consensus rating. In the last three months, JD has received 3 buy and 2 hold ratings. These analysts have an average price target on the stock of $50.60. Given that JD is currently trading at $43.80, this suggests a potential upside of 16% from current levels.