Citi has analyst upgraded Dada Nexus Ltd (NASDAQ:DADA). (NASDAQ: DADA), to Neutral while also increasing the price target to $1.50, up from the previous target of $1.00. The decision followed Dada Nexus's second-quarter results for the year 2024, which surpassed both Citi's and the consensus estimates.
The company's total revenues declined by 10% year-over-year but outperformed expectations by 4.7% and 3% according to Citi and consensus estimates, respectively. This outcome was attributed to a 47% year-over-year growth in Dada Now, which was partially offset by a 44% decline in JD (NASDAQ:JD) Now.
Dada Nexus reported a Non-GAAP net loss of Rmb142.3 million, which was more favorable than the anticipated losses of Rmb206 million by Citi and Rmb198 million by consensus. This was primarily due to reduced spending in sales and marketing (S&M) and research and development (R&D), though it was somewhat counterbalanced by increased general and administrative (G&A) expenses and a lower gross profit margin (GpM).
The analyst noted that while JD Now is still adjusting its business model, Dada Now's successful expansion into restaurant and beverage key account (KA) chains has supported its resilient growth in on-demand delivery services. Additionally, the sequential improvement in operating loss was seen as a sign of diligent cost control.
Looking into the second half of 2024, Citi expects JD Now to continue experiencing negative growth, while projecting that the growth of Dada Now may slow down but remain healthy, considering its high base. The improved revenue breakdown and disclosure of operating metrics were cited as positive developments.
InvestingPro Insights
Following the recent analysis by Citi, InvestingPro offers additional insights into Dada Nexus Ltd. that may be of interest to investors. The company is currently trading at a low Price / Book multiple of 0.47, which could suggest that the stock is undervalued relative to its book value. Additionally, Dada Nexus holds more cash than debt on its balance sheet, indicating a strong liquidity position that could offer some resilience in challenging economic times. Despite these potentially positive signs, it's important to note that Dada Nexus is not expected to be profitable this year, and the company has been quickly burning through cash, as reflected in its negative free cash flow yield.
InvestingPro Data also reveals that the company has experienced a revenue growth of 5.52% in the last twelve months as of Q1 2024, with a gross profit margin of 33.1%. However, the operating income margin stands at -10.83%, underlining the challenges in achieving profitability. The stock's price performance has been under pressure, with a significant decline of over 74% in the past year.
For those considering an investment in Dada Nexus, there are additional InvestingPro Tips available that provide deeper analysis, including valuation multiples and the company's position within the Consumer Staples Distribution & Retail industry. To explore these insights further and make more informed investment decisions, visit https://www.investing.com/pro/DADA, where over 14 additional InvestingPro Tips are available.
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