Can Dangdang, Vipshop, and LightInTheBox Keep It Up?

Vipshop, LightInTheBox, and Dangdang post double-digit percentage gains last week.

Jan 21, 2014 at 9:02AM

Last week was a rewarding one for investors in China's publicly traded online retailers. LightInTheBox (NYSE:LITB) and daily-deals speedster Vipshop (NYSE:VIPS) soared 15% on the week, and E-Commerce Dangdang (NYSE:DANG) was no slouch with its 11% pop.

There was no material news triggering the rally. Investors simply rotated into the volatile Chinese e-tail market. 

One can argue that the tone was set a week earlier, when LightInTheBox rallied after acquiring Adora in an all-cash deal. It may seem unusual for LightInTheBox -- a company based in China but generating roughly 80% of its sales by selling its locally sourced formal dress and housewares in Europe and North America -- to snap up a Seattle-based social e-commerce provider. However, the move helped give the market a new reason to warm up to LightInTheBox after putting up with back-to-back quarterly disappointments since it went public last summer.

LightInTheBox has now come through with back-to-back weeks of double-digit percentage gains, and it's now trading comfortably above its $9.50 IPO price. It still has to prove that it can live up to expectations, but it's not as if Wall Street's thrown in the towel on LightInTheBox. Analysts see revenue and earnings per share climbing 28% and 40%, respectively, this year.

Vipshop is growing even faster. The provider of flash sales on branded apparel items in China was one of 2013's biggest winners, seeing its shares soar 369% last year. Vipshop isn't cheap at this point, but it's trading at a discount to its heady growth rate, as analysts see profitability more than doubling in 2014 on a 70% top-line burst.

Dangdang is the relative laggard in the group. It's the only one that's expected to post a loss this year, and its projected 20% in revenue growth pales in comparison to LightInTheBox and Vipshop. However, the leading Chinese online book retailer has been able to grow across other media and general merchandise categories. The red ink is disappointing, but the deficits continue to narrow dramatically.

All three companies are well positioned to grow in 2014 even though they are catering to entirely different markets. Last week's double-digit gains may not have been earned by new developments, but all three Chinese e-tailers have the growth and improving fundamentals to keep them moving in the right direction. 

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Longtime Fool contributor Rick Munarriz owns shares of LightInThe Box. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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