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Why Shares of E Commerce China DangDang Inc Tumbled

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  ) were getting banged up today, falling as much as 21% after coming up short on the top line in its first-quarter earnings report. 

So what: The Chinese online retailer posted earnings of $0.01 per share, better than estimates at break even; but revenue growth of 30%, to $279.2, million missed as analysts had expected $285.6 million. CEO Peggy Yu Yu said the company continued to make "good progress in transforming Dangdang from an online bookstore into an integrated online shopping mall," and it "continued on its path to profitability." 

Now what: Guidance for the current quarter was also a bit weak, as Dangdang sees revenue of $311 million against expectations of $320.2 million. Dangdang's stock got punished also because peer Vipshop Holdings soared after its earnings report came out, and because the stock had been bid up significantly during he week, gaining 13% before today's fall. A downgrade from Bank of America to Neutral also weighed on the stock, as B of A sees increasing competition and declining revenue per customer as headwinds for the company. Still, the overall growth story remains intact. I wouldn't get too worked up about today's sell-off.

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  • Report this Comment On May 15, 2014, at 8:21 PM, mfggg wrote:

    1. " $279.2, million missed as analysts had expected $285.6 million.:"

    According to yahoo the estimate was 281.76M

    2. "Dangdang sees revenue of $311 million against expectations of $320.2 million."

    According to yahoo the average estimate is 313.71M

    During the quarter dollar grew 2.6% vs. yuan. It's about $7 million. Thus effectively DANG beat the estimates and offered higher guidance in RMB. DANG operates in RMB world, so would it be natural to calculate in RMB?

    Bank of America's argument of the declining revenue per customer is no convincing either. Just consider Amazon in terms of this metric.

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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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