Morgan Stanley downgrades this Chinese e-commerce stock on weak consumer demand

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Morgan Stanley has been “waiting” for a silver lining because of the uncertainty surrounding growth and profitability at JD.com. The bank downgraded the shares from overweight to equal weight. The bank also reduced its price target from $55 to $33. According to the new price target, shares could rise 18.5% since Thursday’s closing. The shares fell more than 8% in Thursday’s session, reaching a 52 week low. They then dropped another 4.5% during Friday’s premarket. Analyst Eddy Wang said, “We are not confident in the growth recovery that will occur in 2024 or beyond.” “We expect that JD’s strategy and business adjustments, as well as the soft consumer sentiment in China, will continue to impact its revenue growth. The outlook for 4Q23 is also weak.” Wang predicts a long-term trend for a decline in consumption in China. He warned that JD.com could find itself in a less favorable position on the Chinese e-commerce marketplace if it can’t implement its low price strategy. China is experiencing what its top leaders have called a ” tortuous” economic recovery as it exits zero-Covid policy. The real estate market is also experiencing a downturn. Analyst cuts earnings estimates by 3% in 2023, 4% in 2024, and 7% in 2025 due to China’s slower than expected consumption recovery as well as the slower ramp-up for company initiatives. He added that the increasing competition from PDD (which owns Temu and Douyin) could increase pressure on JD.com. The stock has fallen 50.4% in the past year. JD YTD Mountain JD.com Shares — CNBC’s Michael Bloom has contributed to this report.