JD.com Analyst Projects 20% Sales Growth In Q1

JD.Com Inc (NASDAQ: JD) is likely to report first-quarter results that are in-line with or better than consensus projections, backed by gross margin contributions from JD Mall and logistics, according to Morgan Stanley.

The Analyst

Grace Chen maintained an Equal-Weight rating on JD.com and raised the price target from $25 to $28.

The Thesis

Chen quoted Bloomberg as saying that the Chinese e-commerce company has plans to reduce its headcount by as much as 8 percent.

Although a subsequent report said the magnitude will not be so large, it said that the company had been streamlining its organizational structure in response to changes in the business environment.

These restructuring initiatives will boost operation efficiency going ahead, Chen said in a Monday note. 

The sales forecast for the first quarter remains largely unchanged at Rmb120 billion, which is at the midpoint of the guidance, the analyst said. Non-GAAP NP is expected to grow 19 percent year-on-year to Rmb1.2 billion, despite R&D and fulfillment expenses, she said.  

This is expected to be driven by gross margin expansion from JD Mall and logistics due to scale benefits of 1P, strong 3P sales growth and a lower logistics pricing discount, Chen said. 

The analyst expressed concern over intensifying competition, with Suning having gained share in the online home appliance market in the back half of 2018. Taking competition into account, Morgan Stanley maintained its 2019 sales growth forecast at 20 percent. 

Price Action

JD.com shares were down 3.52 percent at $29.50 at the time of publication Monday. 

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