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Goldman Sachs Weighs In On And Wal-Mart's Strategic Alliance

Goldman Sachs Weighs In On And Wal-Mart's Strategic Alliance
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JD.Com Inc (ADR) (NASDAQ: JD) has inked a strategic alliance with Wal-Mart Stores, Inc. (NYSE: WMT), covering business initiatives in both online and offline retail. Goldman Sachs’ David Jin maintained a Buy rating for, with a price target of $31. The analyst commented that the revenue and profit impact is likely to be minimal for JD, particularly in the near term.

According to the terms of the alliance:

  1. will issue 145 million new Class A ordinary shares to Wal-Mart, representing ~5 percent of the enlarged share base
  2. will be taking ownership of Yihaodian’s marketplace platform assets, while Wal-Mart would continue to operate Yihaodian’s direct sales
  3. Sam’s Club China would be opening a flagship store, using’s logistics capabilities
  4. Wal-Mart and would leverage their supply chains together
  5.’s crowd-sourced platform, O2O JV Dada, would be leveraged by Wal-Mart for two-hour home delivery of fresh goods and other items from Wal-Mart stores

Related Link: Wal-Mart, JD Form Alliance That Values Wal-Mart's China Unit At $1.5 Billion

Analysis Of Alliance

While has indicated that Yihaodian’s GMV growth would likely be modest in 2016, this compares with Goldman Sachs’ estimate of 45 percent net GMV growth for, analyst David Jin mentioned. He expects the accretion to’s net GMV to be in the low single digit percent range from 3Q16.

Marketplace contributes about a third of Yihaodian’s total GMV, and will take ownership of this, along with Yihaodian’s brand, website, and app. This the revenue and profit impact is likely to be modest for, especially in the near term, Jin added. management projected synergies from Yihaodian mainly on the back of a strong FMCG focus and strong position in Eastern and Southern China. “Food and beverage is a trillion-Rmb market in China based on GSe, with low single digit online penetration, and has also been one of the fastest-growing GMV categories for JD over the past few quarters,” the analyst wrote.

Wal-Mart managed 432 stores in China, as of January 31, 2016. Among these 12 are Sam’s Clubs. “According to, Sam’s Clubs has 1.6mn members in China, who purchase ~Rmb50k/year; they charge Rmb260/yr for membership and offer members discounted prices,” Jin said.

Latest Ratings for JD

Mar 2018JP MorganMaintainsOverweightOverweight
Jan 2018KeyBancMaintainsOverweightOverweight
Dec 2017Stifel NicolausReinstatesBuy

View More Analyst Ratings for JD
View the Latest Analyst Ratings

Posted-In: David Jin Goldman SachsAnalyst Color Long Ideas Reiteration Top Stories Analyst Ratings Trading Ideas Best of Benzinga


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