UPDATE: Deutsche Bank Initiates Coverage On JD.com

Deutsche Bank initiated coverage on JD.com Inc(ADR) (NASDAQ: JD) Wednesday with a Hold rating and $26.60 price target.

Analyst Alan Hellawell III expected the company "to continue to gain market share by leveraging its fully-integrated fulfillment infrastructure and inhouse delivery service” and that margins would “improve gradually thanks to category expansion toward higher margin non-3C products and marketplace growth."

The report noted that "the company ranked as the second largest B2C ecommerce company in China in 2Q14, with a 21 percent market share based on transaction volume. In terms of direct online sales only, JD is China’s largest player, with a market share of 54.2 percent in China in 2Q14, expanding from 47.3 percent in 2013 according to iResearch."

Hellawell also expected "marketplace GMV to account for ~47 percent of total GMV by 2017E, compared to ~37 percent in FY14E. The evolving partnership with Tencent could also provide upside potential in mobile commerce."

The report concluded that investors should "not expect JD.com to become profitable until 2016 given its heavy fulfillment infrastructure spending in recent years and its penetration into lower tier cities with lower order density."

JD.com traded at $24.77 in the premarket, down 0.04 percent.