Why Baozun Stock Plummeted This Week
What happened
Baozun (NASDAQ: BZUN) stock saw another big sell-off over the last week of trading. The Chinese e-commerce services company's share price fell 29.1% from the previous Friday's market close, according to data from S&P Global Market Intelligence.
Baozun published its fourth-quarter earnings results on March 10, delivering earnings that came in ahead of the market's expectations, but that wasn't enough to stop its stock from suffering a dramatic pullback in light of a revenue shortfall. The company posted non-GAAP (adjusted) earnings per American depositary share of $0.17 on sales of $497.9 million, while the average analyst estimate had called for adjusted earnings per share of $0.14 on revenue of $500.6 million.
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So what
Facing challenging comparison to last year's pandemic-driven tailwinds, Baozun's revenue dropped 5.2% year over year in the fourth quarter. Distribution gross merchandise volume conducted across the company's platform also dipped 16% compared to the prior-year period.
Now what
Baozun has generally posted solid sales and earnings performance over the last few years, but this hasn't translated into strong performance for the company's stock. It remains highly dependent on its partnership with Alibaba, and that's been a major point of concern for investors. China's moves to exercise increasing control over large technology companies have cast the smaller e-commerce player's future in doubt, and investors have been moving out of the stock as appetite for risk has waned across the market.
Baozun now has a market capitalization of roughly $471 million and is valued at roughly 11 times this year's expected earnings and 27.5% times expected sales. For a company that's still posting relatively strong sales and earnings performance, those metrics might look quite low, but the confluence of other risk factors at play means that it's difficult to value the company along traditional lines.
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Keith Noonan owns Baozun. The Motley Fool owns and recommends Baozun. The Motley Fool has a disclosure policy.
