Wal-Mart Stores, Inc. (NYSE:WMT) pops the question to JD.Com Inc (NASDAQ:JD) and JD says yes. Let’s see what analysts have to say about how this merging of houses will affect each stock.
Wal-Mart Stores, Inc.
Merrill Lynch analyst Robert Ohmes weighed in on Wal-Mart following the announcement that the company is selling its e-commerce business in China to JD as part of a strategic tie-up, which values the deal at almost $1.5 billion. The company will issue new shares to the brick-and-mortar retailer, which will own roughly 5% of JD stock.
New business agreements now allow WMT and JD to partner in multiple strategic areas. Wal-Mart is to continue operating Yihaodian first party direct sales and can still sell on the marketplace; however, JD will now take responsibility for third party sales. According to Ohmes, Wal-Mart China will now become a preferred retailer on Dada, JD’s online-to-offline platform and China’s largest crowd-sources delivery platform. The analyst notes, “Both WMT and JD will leverage each other’s supply chains to increase product selection.’
Ohmes expects to see a one-time estimated EPS gain of $0.16 – $0.19. In addition, the analyst upholds that Yihaodian asset sales should “alleviate some EPS pressure related to modest losses that we believe WMT was incurring on the Yihaodian business,” though Wal-Mart has not actually quantified those losses.
Ohmes reiterates a Neutral rating for WMT with a price target of $72.00.
According to TipRanks‘ statistics, Robert Ohmes has a 48% success rate recommending stocks with an average return of 1.6% per recommendation.
Out of 15 analyst polled by TipRanks in the past 3 months, 20% of analysts issued a Buy rating for WMT, 67% are issued Hold rating, and 13% issued a Sell rating for the stock. The average 12-month price target for WMT is $72.42, marking a 1.34% upside for the stock.
MKM analyst Rob Sanderson provided his views on JD.com following the merger announcement of Wal-Mart owned Yihaodian assets with JD. Sanderson is bullish on the stock, noting that the strategic partnership between WMT and JD has “synergies” for both sides of the agreement.
The analyst firmly believes that there are benefits for both sides of the JD-WMT agreement. He notes that the addition of Yihaodian, a major online retail heavy hitter, to JD will eliminate competition in the e-commerce marketplace. He also contends that this agreement will initiate an expansion of imported products for Chinese consumes in JD’s marketplace and will “help the company scale up its fulfillment investments.”
Smaller categories in the online-to-offline market place will also be boosted. Invigorating strength in fresh foods, groceries, and other miscellaneous household products is to be expected, according to Sanderson.
Sanderson factors a slight slowdown in apparel markets as well as concerns with smartphones and other electronics into his analysis. Despite these growing concerns, the analyst remains optimistic on the company and expects 40%+ growth and contends that gross profit dollars will outgrow revenue citing a 60% surge in orders.
The analyst maintains a Buy rating for JD with a target price of $32.00.
TipRanks shows 83% of analysts issuing a Buy rating for JD, and the other 17% remaining on the sidelines rating for the stock. The average 12-month price target for JD is $34.00.