Given recent market volatility, smaller cap stock like Dada has experienced even bigger fluctuation of share price movement, and we rate High Risk to better reflect the investment risk as the growth outlook remain uncertain.
Downside risks that could prevent the shares from reaching our target price include: 1) increasing competition from existing players or newcomers; 2) retailers refocus on their own apps or mini program; 3) declines in the size of rider pools and/or stricter regulations covering riders’ employments rights and conditions; and 4) potential shifts in consumer behavior in China (including related to macroeconomic conditions, Covid-19, etc.). Upside risks include: 1) faster-than-expected economic recovery; and 2) strengthening internal control and corporate governance.
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