Google announced yesterday that it will invest $550 million in Chinese e-commerce powerhouse JD.com (NASDAQ:JD), part of the internet giant’s efforts to expand its presence in fast-growing Asian markets. Under the partnership agreement, the two companies indicated intent to collaborate on a range of strategic initiatives, including joint development of retail solutions in regions such as Southeast Asia, the U.S. and Europe.
In reaction, Wells Fargo analyst Ken Sena boosted his price target on JD from $47 to $53, and maintained an Outperform rating on the stock.
Sena commented, “This partnership adds to JD’s strong list of existing data and strategic partnerships with Tencent, Walmart, Baidu, Qihoo 360 and Vipshop. And, based on the strategic nature of this new relationship, where Google holds obvious expertise in audience and transaction, in addition to the company’s mention of record 6.18 anniversary sales, we are modestly increasing 2Q18 and full year revenue estimates and assigning a higher multiple.”
“On strong anniversary sales, for 2Q18, we are increasing our revenue estimate by 1.4% to ¥125.3bn/$19.5bn (34.5% y/y), or 2% higher than Street. On unchanged gross margin of 13.5% and Adj. NI margin of 1.1%, our EPS estimate moves to ¥0.92/$0.14 (from ¥0.91). Flowing 2Q estimates through, for full year 2018, our revenue estimate is increased by ~1% to ¥481.0bn/$75.0bn (32.8% y/y), or 2% higher than Street. On unchanged gross margin of 14% and Adj. NI margin of 1.5%, our EPS estimate moves up to ¥4.74/$0.74 (from ¥4.63 and Street’s ¥4.32),” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ken Sena has a yearly average return of 13.9% and a 67.8% success rate. Sena has a 5.7% average return when recommending JD, and is ranked #407 out of 4829 analysts.
How does Sena’s bullish bet weigh in against the Street? It appears the analyst is not the only one enthusiastic on this e-commerce platform’s prospects, with TipRanks analytics demonstrating JD as a Strong Buy. Out of 5 analysts polled in the last 3 months, 4 are bullish on JD stock while 1 remains sidelined. With a return potential of nearly 10%, the stock’s consensus target price stands at $48.00.