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Vipshop Stock Has a Lot to Prove on Monday

By Rick Munarriz - May 12, 2018 at 2:00PM

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The Chinese apparel discounter reports financial results on Monday night, and the stock will be a big mover the next day.

If Vipshop Holdings (VIPS -1.62%) investors are feeling jittery these days, it's because they know that earnings season is here. The Chinese online discounter of brand-name apparel reports its first-quarter results after the market close on Monday, and it's been known to treat longs and shorts to some pretty wild swings. Vipshop will host its earnings call on Tuesday morning ahead of the market open.

The dot-com speedster is expected to check in with another quarter of hearty double-digit percentage growth on the top line. Analysts see revenue rising 22.4% to $3.08 billion. It's a different story on the bottom line, where analysts see earnings per share declining to $0.18 after scoring a profit of $0.21 a year earlier. 

Vipshop homepage showing featured apparel deals.

Image source: Vipshop Holdings.

Watch me move

Vipshop has had no shortage of ups and downs. The stock more than doubled for three consecutive years, from 2012 to 2014 -- something you rarely see -- only to lose nearly half its value in the two years that followed. The stock bounced back slightly in 2017. Vipshop has gone on to trounce the market averages in 2018, but it's now declining for the third month in a row. 

A strong quarter can naturally end the streak of monthly slides, and a truly blowout showing would put an end to an even longer run of misfortune. Vipshop has posted six consecutive quarters of decelerating revenue growth. It would have to increase its revenue by more than 27.1% -- and we know analysts think it will fall well short of that -- if Vipshop doesn't want to extend that streak of slowing top-line gains to seven quarters on Monday night. 

Investors have taken the decelerating growth in stride. The stock still managed to move nicely higher through 2017 and then sharply higher through the first two months of 2018 in that environment. The bigger concern at Vipshop is its bottom line. The decline in earnings that analysts are targeting in the upcoming report isn't a fluke. It would be Vipshop's fourth consecutive quarter of posting lower earnings. This is becoming a competitive niche, and markdowns and promotional activity have been aggressive to attract and retain customers. The stock's direction on Tuesday will likely be guided by any visibility that Vipshop can offer on that front.

The big move higher earlier this year didn't have to do with upbeat financials. At least three analysts and countless more investors warmed up to the stock after Vipshop announced a partnership with two of China's dot-com darlings. Having two of China's e-commerce behemoths on its side -- investing a combined $863 million in the much smaller Vipshop -- is supposed to enhance the platform's visibility. The deal includes Vipshop integration into the two larger platforms. We'll see if Vipshop sheds any light on how that partnership is playing out.

Vipshop has historically made big moves when it cranks out quarterly results, but with other potential pitfalls and opportunities in play, there will be a lot of moving parts to Monday's report.  

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