Uncertainty around growth and profitability for JD.com has kept Morgan Stanley “waiting for the silver lining.” The bank downgraded shares to equal-weight from overweight. It also slashed its price target to $33 from $55. The new price target suggests shares could gain 18.5% from Thursday's close. Shares tumbled more than 8% during Thursday's trading session, hitting a 52-week low, and fell another 4.5% in the premarket Friday. “We have low conviction in a strong recovery in growth in 2024 and beyond,” said analyst Eddy Wang. “We expect the soft consumption sentiment and JD's business and strategy adjustments to continue to weigh on its revenue growth and margins in 3Q23; the 4Q23 outlook also remains weak.” Wang is forecasting a long-term trend of a consumption downgrade in China. He warned that, if JD.com can't successfully implement its low-price strategy, the company could be in a structurally less favorable position in China's e-commerce market. China has been undergoing what some of the country's top leaders call a ” tortuous ” economic recovery, as it emerges from its zero-Covid policies. It is also undergoing a slump in its real estate market . The analyst cut his earnings estimates by 3% for 2023, 4% for 2024 and 7% for 2025 amid China's slower-than-expected consumption recovery, as well as a slower ramp-up of the company's initiatives. Intensifying competition from PDD, which owns Temu, as well as Douyin could put more pressure on JD, he added. The stock is down 50.4% year to date. JD YTD mountain JD.com shares —CNBC's Michael Bloom contributed to this report.
Morgan Stanley downgrades this Chinese e-commerce stock on weak consumer demand