After applying a 10% holdco discount, we derive a target price of $47/share, or roughly 12% upside from the current level. For the core, we derive a price target of $47/share based on 10% WACC and 15x terminal multiple.įor the investments, we derive a $4/share. We value JD based on its core and investments. We believe that JD is fairly priced at a premium compared with BABA given its revenue growth as well as potential margin upside that should lead to profitability. JD is currently valued at 30x 2020E consensus P/E compared with BABA's 27x and PDD's 200x forward P/E.

The stock has gone up 20% since our initiation (see: JD: Smooth Execution Through Rough Times) compared with the NASDAQ’s 13% return, and we believe the stock can have delivered another outperformance year assuming solid execution. Logistics will likely play a key role in ensuring the strategic success given JD’s logistics services is a key differentiator when it comes to delivering a superior ecommerce service experience relative to BABA or PDD. Much of the growth will likely come from lower-tier and lower-income penetration, in our view, as these areas were largely overlooked by JD in the past. Management recently reiterated that revenue growth is a top priority for 2020 while taking a prudent approach to ensuring a certain level of profitability. JD.com ( NASDAQ: JD) remains one of our top picks within the ecommerce space along with Alibaba ( BABA) as we believe 2020 should set the stage for revenue growth via expansion into lower-tier cities, incremental margin expansion via cost optimization and the ongoing investment of its ecosystem in logistics.

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