Chinese Stock Hits New Low After Morgan Stanley Bear Note

More bearish brokerage notes could come down the pike

Managing Editor
Sep 17, 2018 at 9:44 AM
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Chinese e-commerce concern JD.com, Inc. (NASDAQ:JD) is down 4.7% at $25.84 in early trading -- a new annual low -- after Morgan Stanley slashed its price target to $25 from $37 -- the lowest on Wall Street. Despite reiterating an "equal weight" rating, analyst Grace Chen said the company's earnings will suffer well into 2019 on the back of slowing gross merchandise value growth, lighter margins, and accelerated investments.

Morgan Stanley's bear note is only the latest in JD.com's recent misfortunes. In fact, earlier this month, the company's CEO Richard Liu was arrested on rape allegations, sending the shares plunging. JD has now shed 37.6% year-to-date.

In addition to JD's fundamental woes, some of the stock's recent underperformance was likely due to increased selling pressure from shorts. Short interest on the stock has shot up 54.6% since mid-July to 47.71 million shares. This accounts for just 6.5% of JD's available float, though, suggesting the stock could be at risk of additional losses, should shorts continue to pile on.

More bearish brokerage notes could come down the pike, too. While six of the 10 firms following JD sport "strong buy" recommendations, the stock's average 12-month price target of $40.86 is a nearly 56% premium to current levels.

 

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