Investors in JD.com, Inc. (NASDAQ:JD) had a good week, as its shares rose 3.9% to close at US$41.46 following the release of its annual results. Revenues were CN¥577b, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at CN¥8.21, an impressive 57% ahead of estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for JD.com from 35 analysts is for revenues of CN¥679.2b in 2020, which is a decent 18% increase on its sales over the past 12 months. Statutory earnings per share are forecast to tumble 34% to CN¥5.49 in the same period. Before this earnings report, analysts had been forecasting revenues of CN¥678.1b and earnings per share (EPS) of CN¥6.04 in 2020. So it looks like there’s been a small decline in overall sentiment after the recent results – there’s been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
Despite cutting their earnings forecasts, analysts have lifted their price target 9.7% to CN¥326, suggesting that these impacts are not expected to weigh on the stock’s value in the long term. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic JD.com analyst has a price target of CN¥418 per share, while the most pessimistic values it at CN¥234. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await JD.com shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that JD.com’s revenue growth is expected to slow, with forecast 18% increase next year well below the historical 29%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 16% next year. So it’s pretty clear that, while JD.com’s revenue growth is expected to slow, it’s expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for JD.com. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple JD.com analysts – going out to 2024, and you can see them free on our platform here.
We also provide an overview of the JD.com Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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