JD.com Sinks to Record Low as Wall Street Brokers Turn Bearish

(Bloomberg) — JD.com Inc. slumped to a record low in Hong Kong, after a slew of Wall Street brokerages cut the outlook for the e-commerce retailer on concerns that China’s consumption growth will remain sluggish.

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At least seven brokerage firms have either downgraded the stock or lowered price targets in the past two days. That includes Morgan Stanley, which reduced its call to equal-weight and slashed its target by 40%, as well as Citigroup Inc., which cut its price estimate by a third. All of them cited worries about how JD will grow its revenue amid the weaker macro environment in China.

“We expect a long-term trend of consumption downgrade in China, and if JD is not able to successfully implement its low price strategy that caters to the trend, we think it could be in a structurally less favorable position in China’s e-commerce market,” Morgan Stanley analysts including Eddy Wang wrote in a note.

JD.com’s shares dropped as much as 11% to an all-time low of HK$104.20 since its listing in 2020 in Hong Kong. China’s subdued inflation print released Friday may compound the concerns as traders brace for consumers to cut back on their spending amid the country’s slower growth trajectory.

JD.com’s share price has halved this year and the stock is trailing most of its peers on the Hang Seng Tech Index and Nasdaq Golden Dragon China Index. Consumer demand for big-ticket items has been particularly weak in China, a segment that the firm used to thrive on in the past.

To make matters worse, its massive discount campaign hasn’t helped in fending off the challenge from PDD Holdings Inc., which is grabbing market share using a low price strategy.

“Heading into 4Q23, despite seasonally strong 11.11 promotion, we believe cautious consumption sentiment and competitive pricing discount are likely to weigh on any meaningful rebound of growth for JD,” Citigroup analysts including Alicia Yap wrote in a note.

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