Personal Finance

Can Vipshop Stock Bounce Back After Last Week's 11% Drop?

A Vipshop homepage.

A markdown specialist got marked down itself last week. Shares of Vipshop Holdings (NYSE: VIPS) slumped 11.1% last week, with most of the slide taking place on Friday following an analyst downgrade.

Alan Hellawell at Deutsche Bank is lowering his rating on Vipshop stock form buy to hold. Hellawell is concerned about the competitive pressures following industrywide discounting in June. As a provider of internet flash sales on brand-name apparel Vipshop is no stranger to markdowns, but when everybody's clearing out excess inventory, it gets that much harder to stand out. Vipshop stock would go on to revisit its 52-week low of $10.50 on Friday.

A Vipshop homepage.

Image source: Vipshop Holdings.

Let's make a deal

Vipshop stock has now posted double-digit percentage declines in back-to-back months. Friday's analyst downgrade was enough to send the shares 14.7% lower for all of June, and this follows a 10.8% swoon in May after Vipshop posted poorly received quarterly results .

Net revenue soared 31% to the U.S. equivalent of $2.32 billion in May's quarterly report with adjusted earnings for its first quarter rising 28% to $0.19 a share. Armed with 26 million active customers -- 32% more than it was serving a year earlier -- Vipshop's popularity isn't showing any signs of fading.

May's report resulted in mixed reviews among Wall Street pros. JPMorgan upgraded the stock from neutral to overweight, but Nomura Instinet downgraded the shares from buy to neural.

Deutsche Bank's Hellawell downgrade on Friday is problematic. It comes just as the quarter was coming to a close, leaving investors to wonder if Vipshop will fall short of its earlier top-line guidance. Vipshop was targeting 26% to 30% in revenue growth for the second quarter at the time of its mid-May earnings report. It has historically been conservative on that front. It was eyeing a similar range for the first quarter, coming through with a 31% uptick. Vipshop wrapped up last year's fourth quarter with a 37% top-line surge despite forecasting just 30% to 33% in growth.

If Hellawell saw the competitive climate getting troublesome enough to sting sales in June, it will naturally be reflected in Vipshop's next quarterly report, possibly ending its streak of topping its own revenue growth targets. If there's a silver lining in the downgrade it's that Hellawell lowering his price target from $15.50 to $12.60 still leaves room for upside at this point. His new price goal is 19% higher than where the stock finds itself now. We'll have to wait until August to see how things played out last month.

10 stocks we like better than Vipshop Holdings

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Vipshop Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 5, 2017

Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More