Alright, folks, let’s dissect the latest from JD.com (JD.O). Morgan Stanley just threw a bit of a curveball our way. They’ve acknowledged JD’s bullish move of lifting its 2025 revenue and earnings growth outlook for both the group and its retail arm (JDR) into double-digit territory – that should be good news for the stock, right?
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However – and this is a BIG however – don’t pop the champagne just yet. The elephant in the room, as usual, is JD’s food delivery business. They’re conspicuously silent on projected losses there. This lack of guidance, my friends, is a blinking red light. It signals potential for further earnings revisions downward as the year progresses.
Let’s break this down a bit. JD is clearly trying to diversify, and delivery seemed like a good play. But scaling that business profitably is proving to be a brutal challenge.
Here’s a quick look into the world of China’s e-commerce landscape:
China’s e-commerce sector is dominated by giants like Alibaba and JD.com. Competitive pressures are fierce, driving companies to explore adjacent markets such as local services and delivery.
Food delivery, while experiencing rapid growth, operates on notoriously thin margins. Fierce competition from established players like Meituan means JD faces massive user acquisition and retention costs.
Investment in logistics and technology is crucial for success in Chinese e-commerce, but requires significant capital expenditure, impacting short-term profitability.
Analysts at Morgan Stanley now anticipate 13% year-over-year revenue growth for JD in 2025. Despite this positive outlook, they’ve slashed their earnings forecasts for 2025, 2026, and 2027 by 14%, 7%, and 5% respectively, directly factoring in the ongoing investment in the delivery service. They’re maintaining an ‘Equal Weight’ rating, but… they’ve also snipped the US ADR target price to $39. In plain English? Cautious optimism, tempered by real concern. This isn’t a “run to the hills” moment, but it’s absolutely a “keep a very close watch” situation. We need clarity on the delivery business before getting truly excited about JD’s prospects.
