JD.com (NASDAQ:JD) will be showing off its second-quarter earnings for 2018 come August, and top analyst Scott Devitt at Stifel is exceedingly confident on the Chinese e-commerce giant ahead of its print.
Devitt is forecasting 2Q:18 net revenue of ¥124.1B (33.2% y/y growth), which is modestly above consensus of ¥123.1B (32.1% y/y growth) and near the high-end of the guided range of ¥120.0B-124.0B. Devitt expects direct sales growth of 31% y/y and services & other sales growth of 56% y/y. Devitt’s 2Q adj. net income margin estimate of 0.9% matches consensus expectations. Furthermore, Devitt expects profitability to improve in the back half of the year driven by margin expansion in both JD’s core and logistics businesses, with the latter being driven by increasing utilization
Devitt stated, “JD shares have been challenged year-to-date due to a number of factors including the company’s heightened level of investment (and the perceived impact on margin trajectory), trade war fears, and a slowdown in JD’s apparel category due to increased competition. We support the company’s ongoing investments in logistics and don’t believe this initiative will limit JD’s margin potential over the long run. We see the company’s logistics assets as a key differentiator given that JD can control the end-to-end customer experience. We believe there’s also strong monetization upside potential as more merchants opt to fulfill through JD’s logistics services. While trade war fears have weighed on investor sentiment, we think concern may be overblown (for now).”
“We remain confident in the management team’s execution and support where investment dollars are focused as we believe the initiatives support greater long-term growth potential without sacrificing margin potential. We maintain our Buy rating due to JD’s strong competitive positioning, long-term secular growth opportunity, and relatively attractive valuation,” the analyst concluded.
Net net, Devitt reiterates a Buy rating on JD.com shares, with a price target of $50, which represents a potential upside of 41% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Scott Devitt has a yearly average return of 25.5% and a 73% success rate. Devitt has a -11% average return when recommending JD, and is ranked #47 out of 4840 analysts.