Dada Nexus Earnings: Revenue Misses Badly as Firm Faces Further Headwinds; Valuation 33% Lower

We are lowering our fair value estimate to $2.00 from $3.00 for Dada Nexus after its first-quarter 2024 revenue of CNY 2.45 billion missed badly and was 12% below our CNY 2.77 billion estimate. This marks the second quarter in a row that it missed revenue since questions were raised about its accounting practice that resulted in the company restating its revenue and cost of goods line items in previous financial statements. The revenue miss was due to the strategic decision to dial back incentives that led to lower demand for JDDJ on-demand deliveries, which is now branded as JD Now. As a result, segment revenue declined 28% year on year. Advertising revenue on the platform also declined, which may signal problems with user retention, as well. On the bright side, sales and marketing expenses for the quarter declined 38% year on year, and operating loss margin narrowed to 15% from 17% due to lower incentives. Its intracity and last-mile delivery unit, Dada Now, also continued to penetrate larger-brand clients, seeing revenue growth of 57% year on year, which cushioned the loss of market share and revenue decline from JD Now. Dada Nexus is currently implementing a new strategy by focusing on users from JD.com, its parent company, and offering free delivery to customers at a lower minimum order threshold (CNY 29 from CNY 59).