Why E-Commerce China Dangdang Inc. Is Up 40% in 2014

It's been a good year for investors in China's leading online retailers. Vipshop -- the fast-growing provider of flash sales on brand-name apparel -- has seen its stock more than double through the first six months of 2014. E-Commerce China Dangdang  (NYSE: DANG  )  hasn't been as buoyant, but shareholders are unlikely to complain about the 40% return amassed during the first half of the year.

Dangdang got off to a strong start. In late February, it posted blowout quarterly results. The 22% uptick in revenue for the quarter and all of fiscal 2013 may not seem very impressive, given that most of China's publicly traded Internet retailers are growing substantially faster, but Dangdang did surprise the market with a return to profitability for the period. That was enough to make the Web-based seller of books, media, and other general merchandise a big winner during the first few months of the year. 

Dangdang's subsequent quarter wasn't so hot. Revenue growth may have accelerated -- up 30% for the period -- but weaker-than-expected top-line guidance tripped up investors. Bank of America downgraded the stock after the unflattering report, lowering its price target on the shares from $23 to $15. The move came as a sharp contrast to Vipshop, which itself posted better-than-expected results, with at least two analysts boosting their price targets following the well-received results. 

Mixed showings suggest that Dangdang hasn't earned this year's 40% pop, but have you been keeping tabs on investor appetite for China's online retailers? We've seen IPOs skyrocket and dot-com giants buying up stakes in leading e-tailers. Buzz about Alibaba going public in the coming weeks has only intensified the spotlight on e-commerce in the world's most populous nation. This has made the niche a fertile turf for investors with the risk tolerance to buy into China's growth darlings.

The second half of the year will be challenging. Dangdang will have to sustain its newfound profitability and, even though analysts see that happening -- expanding on that nicely in 2015 -- Dangdang's volatile history will result in Mr. Market's swift judgment if it doesn't deliver.

An earlier-than-expected return to profitability coupled with IPOs and M&A activity have made Dangdang popular. Sustaining the attention will be all on Dangdang.

Dang! This coming device has every company salivating
Companies like Dangdang that are yielding substantial returns for investors tend to catch everyone's eye, but the best investors consistently reap gigantic profits by recognizing true potential earlier, and more accurately, than anyone else. Let me cut right to the chase. There's a product in development that will revolutionize not just how we buy goods, but potentially how we interact with the companies we love on a daily basis. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need The Motley Fool's new free report on the dream team responsible for this game-changing blockbuster. CLICK HERE NOW.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3015918, ~/Articles/ArticleHandler.aspx, 8/28/2015 11:27:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 2 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:02 PM
DANG $6.15 Down -0.21 -3.30%
E-Commerce China D… CAPS Rating: **