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Why Baozun Stock Jumped 16.8% in April

By Keith Noonan – May 10, 2019 at 7:13AM

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Shareholders are hoping that China and the U.S. will reach an agreement on trade soon.

What happened

Shares of Baozun (BZUN 7.17%) gained 16.8% in April, according to data from S&P Global Market Intelligence. The Chinese e-commerce company's shares climbed as it appeared increasingly likely that China and the U.S. were making progress on an agreement that would resolve trade disputes and ease tariffs. 

BZUN Chart

Data source: BZUN YCharts.

Baozun's business is built on providing American and European companies with customizable online-retail websites and services tailored for success in the Chinese market. A sustained antagonistic relationship between the two countries could hamper China's economic growth and have a negative impact on Baozun's performance. Therefore it makes sense that the company's share price has seen significant movement in relation to the trade talks over the last year. 

A shopping cart icon on a mobile phone.

Image source: Getty Images.

So what

Comments made by President Trump in March and April seemed to indicate that progress was being made on a trade agreement with China, helping to spur Baozun stock to an upward trajectory. The ongoing trade disputes have been a significant drag on the e-commerce company's outlook and stock performance, so while there wasn't any ground-breaking company specific news, it's not surprising that the prospect of a resolution to the trade situation translated into significant pricing momentum.

While shares climbed last month as talks seemed to be heading in the right direction, May arrived with late-breaking complications in the negotiation process -- throwing the market for another curve. 

Now what

Baozun stock has given up some ground in May due to the lack of a resolution to the trade dispute and new tariffs going into effect. Shares are down roughly 5% in the month so far. 

BZUN Chart

Data source: BZUN YCharts.

The trade standoff continues, but risk-tolerant investors may want to take a close look at Baozun. There's still a huge runway for growth in China's e-commerce market, and the company has managed to build a strong position in what looks like a defensible niche. The business has been posting solid sales growth and earnings gains that are pretty impressive when placed in the context of ramped up investment in its technology platform.

Shares currently trade at roughly 29 times this year's expected earnings. 

Keith Noonan owns shares of Baozun. The Motley Fool owns shares of and recommends Baozun. The Motley Fool has a disclosure policy.

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