JD.com Could Be Worth Buying After Earnings, Says Brean Capital

In a report published Monday, Brean Capital analyst Fawne Jiang maintained a Buy rating on JD.Com Inc(ADR) JD, with a price target of $37, after the company reported robust 2Q results. JD announced its 2Q15 revenue at RMB 45.9bn, representing 61 percent y/y growth, beating the consensus estimate of RMB 44.2bn. The beat was driven by strong y/y growth in active customers and number of total orders, while being partially offset by smaller order sizes. "JD continued to deliver robust GMV growth in 2Q despite a high comp due to consolidation of Tencent's Paipai and Wanggou. Total GMV for JD grew 82% YoY to RMB 114.5bn, or 92% YoY excluding the acquired Tencent business, mainly driven by 72% active customer growth and 87% order growth," analyst Fawne Jiang wrote. JD's 3Q guidance was slightly soft, projecting revenue in the range of RMB 43.2bn to RMB 44.7bn, representing y/y growth of 49-54 percent, with the mid-point marginally missing the consensus estimate of RMB 44.3bn. In the report Brean Capital noted, "While the company provided slightly soft 3Q guidance owing to conservatively factoring in potential macro headwinds amid volatile China domestic stock markets, we view the secular growth story on increasing ecommerce penetration as well as retail growth in China as remaining intact." Jiang expects the company to continue to grow its core ecommerce business solidly, saying that it was encouraging to see "the new initiatives, whether its O2O penetration, cross-border expansion or finance products offerings, continue to get traction," which could "enhance user experience and user stickiness and their reliance on JD's broader base network, creating a virtuous cycle for its long-term growth, in our view."