What Bob Peck Is Watching At JD.com

In a report published Tuesday, SunTrust Robinson Humphrey analyst Bob Peck reiterated a Buy rating and price target of $37 on JD.Com Inc(ADR) JD. The analyst expects the company to report positive trends when it announces its 2Q15 results on Friday.

"We believe that positive user/category momentum such as penetration into rural cities, O2O, apparel, and 6/18 anniversary promotion are strong offsets to the lottery and YoY comp issues," Peck elaborated.

The analyst believes that the company's customer services oriented strategy continues to drive results, while its expansion strategies bring more avenues for growth.

While comps becoming tougher with the start of Q2, the analyst expects JD.Com's category expansion, partnerships with OTA Tuniu and Bitauto Hldg. Ltd. (ADR) BITA, and the O2O investments to have offset the tougher comps.

In addition, total orders are expected to have increased 65 percent year-on-year during Q2, driven to a large extent by the continued suspension of high volume lottery sales. Gross profit is expected to have grown 70 percent year-on-year during the quarter.

However, adjusted EBITDA is expected to come in at a loss of RMB75 million, due to continued investments by the company.

JD.Com has already reported more than 100 percent growth in orders year-on-year to over 15 million, on its anniversary celebration on June 18. "Of note, the company also called out sizable increases in their O2O initiative, JD Daojia," Peck stated.

There has also been positive news feed during Q2, including the company's new partnerships with leading brands to create flagship stores, ramp in international operations, with the launch of the new Russian language site and the launch of five "country malls" that will sell authentic imported items, among others.