Morgan Stanley downgrades JD.com stock to Underweight on slowing growth

Morgan Stanley downgraded JD.com (NASDAQ:JD) to Underweight with a $28 price target, citing expectations of significant revenue growth deceleration to 5.6% in Q4 2025 and 4.4% in 2026, down from 14.47% LTM, as trade-in policy benefits taper and new business investments pressure long-term margins and return on equity. This outlook, which projects non-GAAP net margin declining to 2.3-2.5% by 2030, comes ahead of JD.com's earnings report in three days, with the stock currently trading at $31.79, and contrasts with recent strategic initiatives including a new vehicle launch and a planned Singapore REIT.

Analysis

Morgan Stanley has downgraded JD.com (NASDAQ:JD) from Equalweight to Underweight, setting a price target of $28.00, which is below its current trading price of $31.79. This cautious stance comes just three days before JD.com is scheduled to report its latest quarterly earnings on November 13. The downgrade reflects a moderately negative sentiment from the firm regarding JD.com's near-to-medium term prospects.

The primary drivers for Morgan Stanley's downgrade are projected significant revenue growth deceleration and margin pressure. Revenue growth is expected to slow to 5.6% year-over-year in Q4 2025 and further to 4.4% in 2026, a sharp decline from the 14.47% growth observed over the last twelve months, largely due to tapering benefits from trade-in policies. Additionally, continued investments in new businesses are forecast to negatively impact long-term non-GAAP net margins, declining to 2.3-2.5% by 2030, and ROE, deteriorating from 20.3% in 2024 to 12.6% by 2030.

Despite this bearish outlook, InvestingPro models indicate JD.com is undervalued at a P/E ratio of 8.75, and the company maintains strong cash reserves. JD.com is also actively pursuing strategic initiatives, including a new vehicle launch, discussions for a euro-denominated loan for the Ceconomy acquisition, and a planned $1 billion Singapore REIT, which could provide future growth avenues. Susquehanna, while also lowering its price target to $32.00, noted accelerating growth in Q2, suggesting a mixed analyst perspective on the company's trajectory.

Key Decisions for Investors

• Monitor JD.com's upcoming earnings report closely for confirmation or deviation from Morgan Stanley's decelerating growth and margin outlook.
• Evaluate the long-term impact of JD.com's strategic investments and new business initiatives on future profitability and market positioning, contrasting them with immediate margin pressures.
• Consider the discrepancy between Morgan Stanley's bearish downgrade and InvestingPro's undervaluation assessment, potentially looking for entry points if the stock experiences a significant pullback.