Can Dangdang and Vipshop Keep It Up?

China's Dangdang (NYSE: DANG  ) was one of last week's biggest winners, soaring 11% to push its shares back into the double digits.

The leading online book retailer in China kicked off the week by announcing that it will be reporting quarterly results later this month. That naturally isn't enough to move a stock higher, but it reminds the market to start thinking about what side of the trade investors want to be on ahead of the fresh financials.

The bigger positive catalyst came later in the week when China's General Administration of Customs reported that overseas shipments rose a healthy 10.6% for the month of January relative to the prior year. Economists were holding out for a flattish report. Imports advancing sharply resulted in China's widest trade surplus for the month of January in five years. The report came as a bullish contrast to an uninspiring Purchasing Managers' Index report out of China earlier this month that clocked in at its lowest level since three summers ago.

Dangdang may not be an exporter or a manufacturer, but any signs pointing to an improving Chinese economy suggest that the world's most populous nation will have more money to buy books and other items from Dangdang's growing product categories. 

Dangdang is still not profitable, and when it reports quarterly results on Feb. 27 analysts predict yet another deficit. However, the $0.07-a-share loss that Wall Street is targeting is a far cry from the shortfall of $0.24 a share it posted a year earlier. Don't be surprised if there's even less red ink to be had. Dangdang has come through with narrower deficits than analysts have been forecasting every single quarter over the past year.

Revenue is expected to climb 22% higher.

Dangdang's a pretty volatile investment, and the bulls have been calling the shots lately. The stock has risen for seven consecutive trading days through the end of last week, and that's an impressive streak for a stock that has had its ups and downs.

Dangdang wasn't the only Chinese e-commerce specialist moving higher. Flash-sale speedster Vipshop (NYSE: VIPS  ) climbed 11%, and by the end of the week it had made itself even more appealing by announcing a majority stake in an online discounter of cosmetics. 

Buying a 75% stake in Lefeng is a no-brainer. Lefeng's emphasis on marked-down cosmetics is a natural fit given Vipshop's focus on apparel. It's also buying its stake in Lefeng at a discount to Vipshop's own price-to-sales multiple.

Vipshop was on fire last year, and it's been one of China's biggest winners in 2014. This is the kind of deal that will only attract more investors in the coming days as investors begin to consider the synergies of the deal and the opportunities for Vipshop.

It's a good time to be in China's e-tail market.

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Related Tickers

10/22/2014 4:04 PM
DANG $11.71 Down -0.20 -1.68%
E-Commerce China D… CAPS Rating: **
VIPS $205.00 Up +5.00 +2.50%
VIPSHOP HLDGS LTD… CAPS Rating: **

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