Please ensure Javascript is enabled for purposes of website accessibility

Why Jumei International Holdings Stock Popped Today

By Jeremy Bowman – May 28, 2019 at 12:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the Chinese online cosmetics seller jumped on news of a new share buyback authorization.

What happened

Shares of Jumei International Holdings (JMEI) were moving higher today after the online beauty products retailer announced a new share buyback program. As a result, the stock was up 10.9% as of 11:47 a.m. EDT.

So what

The news seemed to come as a welcome sign for long-suffering Jumei investors as the stock has lost 89% over the last five years and is now trading at less than $3 a share.

Shelves of cosmetics in a store

Image source: Getty Images.

This morning, the company unveiled a share buyback authorization of $100 million, allowing the company to repurchase about a third of its current shares outstanding. 

Jumei has come under pressure over the years as the company has been accused multiple times of selling fake products on its website, and the business has seen both revenue and earnings decline since 2015. Last year, the company had an operating loss of $39.4 million. 

Jumei finished 2018 with $341 million in cash and short-term investments, and no debt, giving it ample firepower to buy back shares and lift its per-share earnings.

Now what 

Though share buybacks can lift a beaten-down stock, they aren't a replacement for growth or a smart strategy. Jumei seems to have lost ground over the years to larger Chinese e-commerce companies like Alibaba, which have strong relationships with global cosmetics companies and are known for their vigilance against counterfeits. 

With trade tensions flaring and questions about Chinese economic growth abounding, there's further reason to doubt Jumei's turnaround potential. While investors surely appreciate the double-digit pop in Jumei's stock today, the news does little to change the company's long-term prospects.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Jumei International Holding Limited Stock Quote
Jumei International Holding Limited
JMEI

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.