Why Vipshop Shares Plummeted

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese online discount retailer Vipshop Holdings sank 16% today after its current-quarter outlook missed Wall Street expectations.

So what: Vipshop's Q2 results managed to top estimates -- EPS of $0.20 beat by $0.01 on a revenue jump of 160% -- but downbeat guidance for the current quarter reinforces concerns over rapidly slowing traffic. While the company continues to grow both earnings and revenue at a breakneck pace, today's report suggests that it isn't growing fast enough to justify its seemingly lofty valuation.  

Now what: Management now sees Q3 revenue of $365 million-$370 million, below Wall Street's view of $376.1 million. "Building upon our increased operation and scale effect, we remain confident that our market leadership position will continue to help us deliver strong returns for our shareholders over the long term," Chairman and CEO Eric Shen reassured investors. Of course, when you couple Vipshop's still-questionable business model with the stock's still-fiery stock price -- it's still over 700% from its 52-week lows -- I'd continue to be cautious about buying into that bullishness.

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

The article Why Vipshop Shares Plummeted originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading