Why Shares of E Commerce China Dangdang Inc. Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of E Commerce China Dangdang Inc. (NYSE: DANG  ) soared today, gaining as much as 27% after a blowout earnings report.

So what: The Chinese online retailer posted a profit of $0.04 a share, better than expectations of a loss of $0.07, while revenue jumped 22% to $325.7 million against estimates of $317.7 million. Gross margin jumped 420 points to 17.6% as Executive Chairwoman Peggy Yu Yu said the quarter reflects the company's "solid execution of our strategies to transform Dangdang from an online bookstore into an integrated online shopping mall targeting mid-to-high-end consumers."  

Now what: Dangdang's outlook was strong, as its first-quarter sales projection of $282.95 million was well ahead of estimates of $256.51 million. Dangdang shares are up over 200% over the past year, and seem to be a riding a wave lifting Chinese e-commerce stocks including Vipshop Holdings, which is up more than 300% in that span of time. Considering its strong growth rate, upside guidance, and expanding Chinese economy, which should provide a long run of sales growth ahead, I'd expect the stock to continue to move higher.   

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  • Report this Comment On February 28, 2014, at 11:25 AM, Decoy0527 wrote:

    I have owned Dang for two years and am happy with the earnings turn around. However, I stay in it mostly because I think consolidation will continue to occur in China internet, and that Dang will be bought out by a bigger player for $20 plus per share. Too many small guys out there.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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