Dada Nexus: Justifiably Cheap

seekingalpha03-28

DADA's most recent Q4 2023 results fell short of expectations, and the findings of its latest independent review were unfavorable.The stock is currently valued by the market at less than 0.4 times ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDada Nexus: Justifiably Cheap\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-28 13:25 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4680899-dada-nexus-justifiably-cheap><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>DADA's most recent Q4 2023 results fell short of expectations, and the findings of its latest independent review were unfavorable.The stock is currently valued by the market at less than 0.4 times ...</p>\n\n<a href=\"https://seekingalpha.com/article/4680899-dada-nexus-justifiably-cheap\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4680899-dada-nexus-justifiably-cheap","article_id":"2422187580","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2422187580","pubTimestamp":1711603546,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"DADA's most recent Q4 2023 results fell short of expectations, and the findings of its latest independent review were unfavorable.The stock is currently valued by the market at less than 0.4 times tra","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4155":"大卖场与超市","BK4588":"碎股","BK4558":"双十一","BK4122":"互联网与直销零售","DADA":"达达集团","BK4563":"昨日强势股"},"translate_title":"达达关系：合理的便宜","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DADA":1},"content_text":"DADA's most recent Q4 2023 results fell short of expectations, and the findings of its latest independent review were unfavorable.The stock is currently valued by the market at less than 0.4 times trailing price-to-sales, and it boasts a decent +3.6% forward buyback yield.I rate Dada Nexus as a Hold, as there are valid reasons for DADA's depressed valuations.igoriss/iStock via Getty Images Elevator Pitch Dada Nexus Limited (NASDAQ:DADA) is awarded a Hold rating. My previous write-up published on October 31, 2023, touched on the preview of DADA's financial performance for the third quarter of last year. I draw attention to Dada Nexus' recently announced Q4 2023 financial results in this update. DADA's valuations are depressed based on the price-to-sales valuation metric, but this is justified considering the company's below-expectations fourth quarter financial numbers and the negative results of its latest independent review. On the other hand, Dada Nexus boasts a reasonably decent forward buyback yield of 3.6% taking into consideration its new two-year $40 million share repurchase plan. My decision is to assign a Hold investment rating to Dada Nexus, taking into account these positive (depressed valuations and healthy buyback yield) and negative factors (results miss and unfavorable independent review findings). Fourth Quarter Results Were Below Expectations DADA published a press release on March 25, 2024, after trading hours revealing the company's financial performance in the final quarter of the prior year. Its key Q4 2023 financial metrics weren't as good as what the analysts had forecasted previously. Revenue for Dada Nexus increased modestly by +3% YoY from RMB2,681 million in Q4 2022 to RMB2,752 million for Q4 2023. Moreover, DADA's actual Q4 2023 sales came in -12% lower than the market's consensus revenue estimate of RMB3,112 million (source: S&P Capital IQ). Prior to its latest results announcement, the market had anticipated that DADA would turn profitable in Q4 2023, but the company's actual performance failed to meet expectations. Dada Nexus' normalized operating loss was -RMB190 million for the most recent quarter, while the sell side had previously projected a positive Q4 2023 non-GAAP operating income of +RMB135 million. Also, the company's actual Q4 2023 non-GAAP net loss amounting to -RMB159 million was worse than the consensus fourth quarter earnings forecast of +RMB157 million. The consensus estimates are sourced from S&P Capital IQ. DADA acknowledged at its Q4 2023 results briefing that there is \"still room for consumer spending power and confidence (in China) to improve\" this year. In other words, the company recognizes that the weak Chinese consumer sentiment last year had led to a significant Q4 2023 revenue miss. China's actual GDP growth for the fourth quarter of the previous year was lower than the consensus projection. Therefore, it is easy to understand why DADA, which describes itself as \"China's leading local on-demand retail and delivery platform\" in its media releases, has recorded below-expectations sales in Q4 2023. In particular, DADA's on-demand retail business referred to as JDDJ reported a -14% YoY drop in segment revenue for the fourth quarter of the previous year, which is in contrast with its flattish segment top line growth for Q3 2023. Furthermore, the negative operating leverage resulting from slower-than-expected top line growth resulted in Dada Nexus reporting a net loss for the latest quarter. New Share Buyback Plan Is A Positive In its March 25, 2024 results release, Dada Nexus disclosed the initiation of a new \"share repurchase program of up to US$40 million of American depositary shares\" for \"a two-year period through March 2026.\" At the company's fourth quarter earnings call, Dada Nexus emphasized that the new share repurchase program is \"part of our broader strategy to create long-term value for our shareholders.\" DADA also added at the most recent quarterly earnings briefing that it will \"stay committed\" to \"enhancing shareholder returns.\" DADA's management comments send a message that the company is very likely to complete its new $40 million buyback plan within the two-year time frame as planned or even earlier. This is a favorable development taking into account two key factors. The first factor is that DADA is resuming share buybacks after taking a pause for a reasonably long period of time. The company's prior share repurchase program was in effect between March 2022 and March 2023, and Dada Nexus doesn't pay a dividend. As such, it is encouraging to see DADA return excess capital to shareholders again. The second factor is that the new share repurchase plan translates into a decent buyback yield. Assuming that Dada Nexus spends the full $40 million on share repurchases in the next 24 months, this will be equivalent to an annualized buyback yield of around 3.6%. Overhang Regarding Independent Review Findings In early March this year, DADA issued a 6-K filing announcing that an \"independent review led by the (board's audit committee\" found that its \"net revenues were overstated\" for the Q4 2022-Q3 2023 period. Dada Nexus noted in this March 5, 2024 6-K filing that there were \"certain online advertising and marketing services transactions\" without \"any apparent business substance\" done to \"primarily meet revenue targets\" in the previous quarters that were uncovered as part of the independent review. On the same day of this 6-K filing disclosure, Dada Nexus also announced that Mr. Bing Fu, the head of its on-demand delivery business Dada Now, will take over from Mr. Jeff Huijian He as the President of the company on an interim basis. At its latest quarterly results briefing, DADA highlighted that its March 25, 2024 results release has already included \"corrections\" to the company's historical Q1-Q3 2023 financial numbers. More importantly, Dada Nexus stressed at the Q4 2023 earnings briefing that it will \"enhance the company's internal policies, systems, controls, record keeping, and implement rigorous internal audits\" going forward. Notwithstanding the appointment of a new president and the commitment to strengthening internal controls, it is inevitable that there will be an overhang on the stock for some time relating to the overstatement of its top line for the earlier quarters. Final Thoughts  DADA's shares are down by -37% in 2024 year-to-date, and the stock is now trading at a trailing price-to-revenue multiple of 0.38 times. I think that Dada Nexus' shares are cheap for valid reasons, taking into account its weaker-than-expected Q4 2023 results and the unfavorable findings relating to its recent independent review. On the flip side, the company's new $40 million buyback program is expected to provide some degree of support for the stock price. In conclusion, my view is that a Hold rating for Dada Nexus is fair.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2422187580"}