JP Morgan Sees JD.com As 'Unique Hybrid Ecommerce Platform,' Initiates With Overweight

In a report published Monday, JP Morgan analysts initiated coverage of

with an Overweight rating and a price target of $42. JD is China's largest online direct retailer, with a market share of 49 percent last year. The company's direct retailing business has achieved robust growth, with competitive pricing and superior logistic user experience. The analysts believe JD 1P's "compelling value proposition to consumers has created a strong entry barrier and sustainable user acquisition vehicle that will continue to propel GMV and user growth in the years to come." JD's market share in China ecommerce is estimated to expand from 9 percent last year to 16 percent in 2018 and its GMV CAGR from 2014 to 2018 is estimated at 46 percent, with potential upside. In the report JP Morgan noted, "We model JD's non-GAAP NM to reach 3.3% in 2018E and stabilize at 8-9% in the long run driven by: 1) 1P GM improvement due to GMV category mix shift and same category GM expansion (JD same category GM is 4-6% lower than offline peers), and 2) increasing monetization of 3P marketplace GMV, which we believe should monetize better than Tmall in the long run due to its ability to capture value of logistic services." "We expect JD to become the fourth most profitable company in our coverage universe in absolute terms by 2018E," the analysts added.