Can Vipshop Keep It Up?
Vipshop was one of last week's biggest winners, hitting an all-time high after a Deutsche Bank analyst upgraded the stock.
Deutsche Bank's rating on the fast-growing Chinese flash-sales specialists is going from hold to buy, and its price target for the shares is going from 43 to 66. Vipshop stock soared 27% on the week.
Now last week was a good one in general for Chinese e-tailers. Bellwether Dangdang moved 11% higher to post back-to-back weeks of double-digit percentage gains. Even market laggard LightInTheBox continued to bounce back. The China-based retailer, which sells mostly through Europe and the Americas, has seen its stock climb 26% since bottoming out this month after a disappointing showing in its first quarter as a public company this summer.
Vipshop remains the market darling here. The stock has more than tripled this year, and it's not just the stock price that's been on a tear. Revenue skyrocketed 160% to $351.3 million in its latest quarter as shoppers gravitate to Vipshop's bargains.
Vipshop has also turned the corner of profitability in a major way after four years of losses. Analysts see a profit of $0.93 a share this year, nearly doubling to $1.80 a share come 2014. The stock's forward earnings multiple of 32 may seem high, but Vipshop is growing a lot faster than that.
Groupon is the company that made flash sales popular, but just as it went on to expand into more general merchandise items to grow its Groupon Goods business, Vipshop is also looking to broaden its scope.
Unlike Groupon's original model selling prepaid vouchers for local restaurants, spas, and service providers, Vipshop's emphasis has been on branded apparel that it can move at overstocked prices. It employs hundreds of fashion-savvy buyers that can vet clothing items to find the right stuff. As it grows, the network effect kicks in with apparel makers seeking it out when they have trendy items that they need to move at closeout prices.
Vipshop has gradually evolved to offer other merchandise categories, but when it truly ventures out of its comfort zone it does so as a marketplace middleman. Vipshop doesn't have a problem using its traffic to promote furniture and appliances as long as the third-party merchant handles all of the heavy lifting of fulfillment.
The future seems bright for Vipshop, and there's room for even more upside despite the seemingly lofty earnings and sales multiples. The forward profit multiple may also be inflated as the company has blown Wall Street's targets away consistently since going public early last year.
Vipshop may no longer be the same kind of bargain that its wares are, but the near-term outlook is understandably rosy and bullish.
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The article Can Vipshop Keep It Up? originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz owns shares of LightInThe Box Holding Co. 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.
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