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It's easy to see why the market warmed up to China's e-tailers. Dangdang and Vipshop posted encouraging financial results, validating the bulls that have bought into these stocks assuming that China's economy and its online migration rates are growing a lot faster than they are finding closer to home.
Ironically, the biggest winner of the three -- LightInTheBox -- is the only one that didn't report its quarterly results. The exporter of China-sourced apparel and housewares checks in with fresh financials tomorrow.
Vipshop kicked off the buoyant week by posting a better-than-expected profit on a 146% surge in revenue in its latest quarter. Vipshop's adjusted net income of $0.26 a share easily surpassed Wall Street's profit target of $0.21 a share. The near-term outlook is solid, with the apparel deals provider eyeing sales to climb 94% to 97% for the current quarter.
Dangdang followed Vipshop three days later with a narrower loss than analysts were forecasting. It's not growing as quickly as Vipshop and LightInTheBox. The online bookseller that has gone on to branch out into more merchandise categories saw revenue climb just 19% in its latest quarter. But the market's encouraged by Dangdang's improving path to profitability.
This brings us to LightInTheBox. Instead of selling mostly to Chinese customers the way that Dangdang and Vipshop do, most of LightInTheBox's sales take place in the U.S. and Europe. It can source everything -- from custom-tailored wedding gowns to sink faucets that emit colorful LED illumination -- cheaply in China, giving it a pricing advantage overseas. LightInTheBox even covers the global shipping tab on big-ticket items.
While it's profitable, results were uninspiring in LightInTheBox's first full quarter as a public company. Its guidance for the quarter that we'll be hearing about tomorrow originally called for 33% to 37% in revenue growth.
So, can the good times continue? Despite the common thread of all three companies emphasizing online retail in China, they are not connected at the hip. Vipshop may have hit an all-time high on Wednesday, but LightInTheBox and Dangdang are trading more than half off their all-time peaks. But the recent trends are encouraging. Analysts are underestimating the earnings potential of Dangdang and Vipshop, and it wouldn't be a surprise if the pros were also short in assessing LightInTheBox's potential for tomorrow's report. Volatility has come with the territory for all three stocks, but it's hard to ignore the healthy historical top-line growth at all three companies. So, yes, Dangdang, Vipshop, and LightInTheBox can keep it up.
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