What happened
Shares of Chinese e-commerce services giant Baozun Inc. (BZUN 4.51%) were down 20.6% at 11:42 a.m. EST on Monday. Today's big drop corresponds with the company's pre-market release detailing its sales results on "Singles Day" in China. In short, it's apparent that Mr. Market didn't take a shine to Baozun's results on what has become one of the biggest single shopping days in the world.
Singles Day, which is held annually in Nov. 11 (yeah, yeah -- 11/11: it's a bunch of ones), is a "holiday popular among young Chinese people that celebrates their pride in being single," according to Wikipedia.
Image source: Getty Images.
So what
This year, Baozun reported 6.55 billion yuan ($941 million) in order value for sales through all of its e-commerce channels. That's a 31% increase from 4.99 billion yuan last year.
The disappointment seems to stem from the fact that this marked a big deceleration in growth on this important day. In both of the two prior years, Baozun reported sales volume on its e-commerce channels that was double the prior year's total.
Baozun wasn't the only e-commerce giant to report a deceleration of growth on this massive consumer holiday. Alibaba Group Holding Ltd. (BABA 2.59%), the biggest of them all, said sales on its channels were up 27%, versus a 39% increase on Singles Day in 2017. Alibaba shares are down 2.3% at this writing, while the broader market of U.S. stocks is down about 1.3%.
Now what
Probably the biggest takeaway is that there's only so much growth one can expect any company to deliver, and Baozun delivered nearly $1 billion in sales across its platforms on Nov. 11. That's a substantial amount of merchandise and services that its e-commerce partners sold, and which Baozun helped to facilitate and distribute. And it's worth noting that its 31% growth for Singles Day was a higher rate than that of Alibaba.
It's also worth noting that as an e-commerce solutions and platform provider, those are primarily the sales of its customers and e-commerce solutions clients, meaning that we can only glean so much information from those numbers as it related to Baozun's performance.
Lastly, Baozun stock is heavily shorted. At last report, some 15% of its shares were sold short, and there's a very good chance that today's drop could have been exacerbated by more short action on today's poor reception to the Singles Day sales results. Add it all up, and you have another tough day for Baozun investors, who have seen their shares lose nearly one-third of their value in six weeks, and over half their value since the peak.
But if it's any consolation, many Chinese tech and e-commerce stocks have taken a beating this year. Alibaba shares have lost 32% off the peak, and streaming giant iQiyi's shares are down 56%.
The big change? Mainly investor sentiment, on fears that China's best growth days are in the rearview mirror, and concerns that the trade war between China and the U.S. -- not to mention legitimate problems with China's behavior when it comes to intellectual property -- could take the shine off the growth opportunity the country represents.
What to do now? In short, probably not put so much weight as the rest of the market on even a massively important day like Singles Day. Baozun is still early in its growth phase, and management is taking steps to get the most out of that growth over the long term. Frankly, I'm more inclined to say the recent sell-off is a buying opportunity than I am to buy into the market's recent fears.
Just consider that if you do buy, it's almost certain to be a bumpy ride.
