JD.com Price Target Lowered, Analysts Keep Bullish Outlook On Stock (NASDAQ:JD)

JD.com has seen it's stock price (NASDAQ: JD) target trimmed today, despite the analyst keeping in place a bullish outlook. The stock is trading at $33.34, down 1.6% on the day, having previously adding 10% in the last week.

Benchmark reduced its price target on JD.com from $53 to $47, while steadfastly maintaining a “Buy” rating. This adjustment reflects a growing consensus that JD.com's aggressive push into the food delivery market, coupled with lingering competitive pressures, will weigh on near-term profitability, even as the company’s long-term prospects remain promising.

• Sentiment: positive despite lowering targets
• Reason for Adjustments: Increased investment in food delivery services
• FY25 Non-GAAP Margin Estimate: 1.9% (lowered due to delivery-related losses)
• FY26 Outlook: Trimmed margins reflecting lingering competitive pressure

The crux of the matter lies in JD.com's strategic decision to invest heavily in food delivery. Benchmark's revised FY25 non-GAAP net margin estimate of 1.9% underscores the anticipated impact of these investments. The firm also lowered its FY26 margin outlook, acknowledging that competitive intensity will continue to be a factor.

This sentiment is echoed by other analysts, with UBS recently lowering its price target to $50, anticipating significant food delivery investments in the third and fourth quarters. Bank of America also adjusted its price target downward to $37, reflecting a more cautious financial outlook. Morgan Stanley’s more drastic cut to $28 highlights the competitive battlefield JD.com is entering, noting a potential 63% year-on-year decline in non-GAAP net profit due to the RMB 10 billion investment in food delivery for the second quarter.

Despite these lowered expectations, the prevailing narrative surrounding JD.com remains bullish. The company's recent stock performance, with a rise from $31.36 on July 11th to its current level, suggests a potential stabilization and a possible shift in momentum. Furthermore, JD.com's valuation metrics indicate a significant discount compared to its peers.

With a P/E ratio of 6.82 and a Price/Sales ratio of 0.29, the stock appears undervalued, potentially signaling an attractive entry point for investors willing to weather short-term headwinds for long-term gains. Mizuho Securities, while lowering its price target to $48, maintains an “Outperform” rating, acknowledging JD.com's robust first-quarter performance, including a notable 20% year-over-year increase in user growth and revenue.

Analysts recognize that JD.com's foray into food delivery, while costly in the short term, represents a strategic move to expand its ecosystem and capture a larger share of the consumer market. The company’s strong revenue growth and high Return on Equity (23.15%) and Return on Assets (8.10%) demonstrate its underlying financial strength and operational efficiency.

With sentiment high, an eye on risk is needed with the stock having bumped into resistance at $34.