The article below highlights the opportunity for investors in Vipshop (VIPS). At ETF PM, we have been working to keep Vipshop (VIPS) and Alibaba (BABA) in our Stock Rotation portfolio, but recent market weakness has forced us to sell both positions.
ETF PM currently has long-term buy-and-hold positions in Alibaba (BABA), and no exposure to Vipshop (VIPS).
Vipshop: The Rising Star of China E-commerce
The richly priced online retailer has had a stellar run. But strong earnings growth could see the stock rise another 35%.
Isabella Zhong, 12/12/14
The first three letters in Vipshop’s name may be VIP, but its business is unashamedly downmarket.
Yet the online retailer that makes its money by selling brand names products at knock-down prices has emerged as a celebrity stock. Vipshop ( VIPS ) has become a very important portfolio holding for an increasing number of fans given its 147% return this year, a move that ranks it as the second best performer among Chinese companies trading in the U.S. via American Depository Receipts. While much of the buzz around China’s internet stocks has centered on the industry’s big names like Alibaba ( BABA ), Baidu (BIDU ) and Tencent ( 700.HK ), it is Vipshop that has emerged as the rising star to watch.
And the stock’s time in the limelight may be set to continue if the pundits are correct. Analysts surveyed by FactSet expect the e-commerce stock to rally from current levels around $20.20 to just shy of $27 a share, a gain of around 35%. While not the 3,600% return delivered since its listing in March 2012, it’s not surprising the generous upside seen in the stock has led to it being given the nod of approval by some fund managers as a top pick among China consumer stocks.
While Alibaba, which has a market cap of $256 billion, dominates China’s e-commerce landscape with its marketplace that connects buyers and sellers, Vipshop has carved itself a small, but profitable, niche. Vipshop, which has a market cap of $11.5 billion, is the undisputed leader in ‘flash sales’, where it sells branded goods, which mainly include clothing and cosmetics, at a steep discount to what they are sold for at brick and mortar stores. Vipshop also targets consumers in China’s lower tier cities. The company’s niche position is viewed as an advantage by analysts. “The company does not see any close follower that can challenge its position,” notes Barclays analyst Alicia Yap, who names Vipshop as her top pick in the Chinese e-commerce arena.
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