Vipshop Holdings Ltd: Chinese Online Retailer Up 75% in 2019, a Much Better Play Than Alibaba

Vipshop Holdings Ltd: Online Retailer Has Potential For Explosive Growth
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Vipshop Holdings Ltd Stock Bullish, Breaks Through Resistance

China is the world’s second-largest economy, its retail market is the largest in the world, and its residents’ disposable income has been rising fast.

While the vast majority of investors get excited about the long-term prospects of Alibaba Group Holding Ltd (NYSE:BABA), there’s an entirely overlooked online retail company that could provide investors with even better long-term gains.

That company, which has been taking the country’s e-commerce industry by storm, is discount retailer Vipshop Holdings Ltd (NYSE:VIPS).

Thanks to consistently strong financial results and earnings surprises, Vipshop stock is up 57% year-over-year and 75% year-to-date. By comparison, Alibaba stock is up approximately nine percent year-over-year and 30% year-to-date.

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Thanks to strong guidance, the stock’s short- and long-term outlook remains bullish.

VIPS Stock Overview

While China is a giant when it comes to retail sales, because of the poor brick-and-mortar retail infrastructure, Chinese shoppers often go online to buy branded, discounted products.

Based in Guangzhou, Vipshop Holdings Ltd is China’s leading e-commerce discount retailer, with 33.1 million active shoppers. (Source: “Vipshop Holdings Limited Investor Presentation August 2019,” Vipshop Holdings Ltd, last accessed September 13, 2019.)

Through the company’s site, you can buy everything from clothing to footwear, to handbags, to electronics, to cosmetics, to home and lifestyle products—and even luxury goods. Vipshop sells more than 30,000 popular brands, at prices that are much lower than at other retailers.

From 2013 to 2018, the site’s total orders advanced at a compound annual growth rate (CAGR) of 41.8%. Over the same time frame, Vipshop’s annual revenue has grown at a CAGR of 42.9%. The company also has a long history of steady gross profit growth.

VIPS Stock Information

Market Cap $6.4 Billion
52-Week Change: 51.6%
52-Week High $9.72
52-Week Low $4.31
Shares Outstanding 667.7 Million
Float 415.2 Million
50-Day Moving Average $7.83
200-Day Moving Average $7.90

(Source: “Vipshop Holdings Ltd. (VIPS),” Yahoo! Finance, last accessed September 13, 2019.)

Vipshop stock had great momentum over the first five months of the year but struggled in July and early August. All that changed after the company reported strong second-quarter financial results in mid-August.

VIPS stock has been on fire since then, jumping 40% in the days after the company announced its Q2 results. Over the last month, Vipshop has been able to build on those impressive August gains, with its share price up 55%.


Chart courtesy of StockCharts.com

Second-Quarter Revenue Up 9.7%, Net Income Soars 19.3%

On August 14, Vipshop Holdings Ltd announced that its revenue for the second quarter ended June 30, 2019, increased 9.7% year-over-year to $3.3 billion. Total orders for the quarter increased by 33% to 147.8 million. (Source: “Vipshop Reports Unaudited Second Quarter 2019 Financial Results,” Vipshop Holdings Ltd, August 14, 2019.)

Gross profit increased 26% year-over-year to $741.3 million, net income advanced 19.3% to $118.5 million, and adjusted net income went up by 84.2% to $154.8 million.

The number of active customers shopping at Vipshop during the second quarter grew 11% year-over-year to 33.1 million.

Furthermore, Vipshop ended the second quarter with cash, cash equivalents, and restricted cash of $1.1 billion, as well as short-term investments of $34.7 million)

“Since we refocused on discount apparel and our profitability, we have seen substantial improvement in our financial results and key operating metrics, proving our strategy is very effective,” said Eric Shen, Chairman, and CEO.

Analyst Take

Thanks to Vipshop Holdings Ltd’s first-mover advantage, high barrier to entry, deepening brand partnership, economies of scale, ability to provide deep discounts, strategic online and offline acquisitions, and loyal customer base, it has become one of the biggest online retailers in the country.

That bodes well for Vipshop stock investors.