Dangdang and Vipshop Are Passing Ships

Last week was cruel for investors in one Chinese e-tailer but kind for another. Shares of E-Commerce China Dangdang (NYSE: DANG  ) slumped 11% after the company posted uninspiring financial results. Vipshop (NYSE: VIPS  ) countered with a 17% surge after serving up another blowout quarterly report. 

Dangdang posted a profit of $0.01 a share with revenue climbing 30% to $285.6 million. That may seem impressive for the company that got its start selling books online -- just like you-know-who -- but analysts were targeting revenue of $285.6 million. Dangdang's guidance for the current quarter at $311 million also clocked in below Wall Street expectations of $320 million.

You don't disappoint on the top line for both the recent quarter and the current period without taking a hit, and things were only made worse by Bank of America downgrading the stock from buy to neutral. Bank of America also slashed its price target from $23 to $15. That may seem like a big cut, but with Dangdang shares dipping into the single digits last week, it actually implies better than 50% upside from here. That doesn't seem like such a neutral rating.

Vipshop, on the other hand, rocked the house. The speedy provider of flash sales on branded apparel saw net revenue soar 126% to $701.9 million. Profitability more than quadrupled, resulting in adjusted earnings of $0.63 a share. As usual, analysts didn't have a clue. They were only holding out for net income of $0.48 a share. Vipshop has consistently blasted through Wall Street profit targets since going public at $6.50 two years ago.

The market ignored Vipshop at the time. The publicly traded e-tailers then were either struggling to grow or generating losses. Vipshop shares sank 15% on its first day of trading. Pity the sellers, and be envious of the buyers that day. Vipshop has gone on to be one of the market's biggest winners over the past two years. 

The market is paying attention. Brean Capital boosted its price target from $185 to $200 on the blowout report. Not to be outdone, Goldman Sachs raised its price target on the shares from $185 to $202.

We'll get another snapshot of Chinese online retailers when LightInTheBox (NYSE: LITB  ) reports tomorrow morning. Vipshop and Dangdang have little in common, but they have even less in common with LightIntheBox. It is based in China and sources most of its gadgetry and tailored dresses in the country, but the vast majority of its sales are shipped overseas. Europe accounts for nearly two-thirds of its business. This has been a more challenging market than investors expected. Sales growth has been decelerating, and LightInTheBox has come up short with larger losses than the pros were forecasting in back-to-back quarters. 

Vipshop may be China's hottest dot-com IPO since 2012, but LightInTheBox has been one of the country's biggest losers after shedding nearly half of its value since going public last summer. 

Success for one of the three used to send shares of the other two rallying, but the disconnect is real these days. Whether LightInTheBox disappoints again tomorrow or stuns the market with a profit and double-digit sales growth, it's not going to carry over into Vipshop and Dangdang. We already saw Vipshop and Dangdang go in different directions last week, so clearly each China-based e-tailer is moving to the beat of its own unique fundamentals.

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  • Report this Comment On May 20, 2014, at 3:57 PM, guitune wrote:

    I think you spoke too soon. Dangdang will have better earnings results coming up. Unless they don't do well again in the coming quarter, it's really too early to throw in the towel.

  • Report this Comment On May 21, 2014, at 2:27 PM, Tbone24 wrote:

    Dang had the upper hand by filing it's IPO in 2010. They failed to increase market share by waging price wars with their competitors instead of tie ups. Their co CEOs seem to be so fiercely independent that they refuse all M&A. This will be there downfall as the bigger players like VIPS, JD.com and Alibaba will price them out of business. Too bad because they had the momo early on and wasted it

  • Report this Comment On May 21, 2014, at 2:42 PM, fallingrocks wrote:

    dang is an old story, vips is a fake story, litb is a hard story.

  • Report this Comment On May 24, 2014, at 6:10 PM, rudy101 wrote:

    %thank you mr. rick munarriz for the article on dangdang and vipshop are passing ships can you do a, article on vipshop holdings v.s. jumei International, vipshop and jumei BOTH of them are in FLASH SALE MARKET I saw a article said jumei tried to compare itself with Vipshop, and its financial report, seemed even better than vipshop"s For examle, Jumei's mobile terminal sales accounted for 49% while Vipshop had 23% in mobile terminal, jingdong's mobile sales accounted for 18% dangdang's accounted for 10%just like vipshop, jumei's business model is also flash sale and special offer AS for repeating purchase rate, Jumei had 88.9% repeating purchase Orders Which was amazing and higher than vipshop's 73.8% compared with vipshop, jumei has benn making net profit consecutively for 6 quarters that why I do RESEARCH on chinese companies thank you very much

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