Vipshop Holdings (NYSE:VIPS) was one of the market's hottest stocks a few years ago, but these days it's as cold as the summer is hot. The Chinese online discounter of brand-name apparel was trading as much as 8% lower on Wednesday despite initially opening higher on news of a potentially shrewd acquisition.

Vipshop is buying Shan Shan Outlets in a deal worth roughly $422 million. Shan Shan operates a small but growing chain of retail outlet shopping centers. An e-commerce leader making a push for a bricks-and-mortar presence isn't a shock, as it's what the global leader is doing these days. Vipshop's cash-rich balance sheet also means that investors don't have to wonder about paying for the new acquisition. Shan Shan's deal is taking up less than half of Vipshop's cash and short-term investments.

It's a smart deal, giving Vipshop more ways to move its marked-down merchandise. Owning physical storefronts also gives Vipshop a way to woo traditional shoppers into its online fold. In merrier times, the market would've probably loved the news, but with Vipshop still waffling about in the single digits, it's hard to win the market's respect.

Vipshop home page with a Forever 21 apparel promotion.

Image source: Vipshop Holdings.

The shopping block

There was a time when Vipshop stock was on fire. The stock more than doubled for three consecutive years -- in 2012, 2013, and 2014 -- but it's been trading exclusively in the single digits since last summer. The stock shed more than half of its value in 2018, but it seemed to be getting back on track by beating the market this year.

Vipshop wasn't at its best in its latest quarterly report. Revenue growth slowed to 7%, but that's not a deal breaker since top-line growth has decelerated for 11 consecutive quarters. Vipshop was also targeting no more than 5% growth with its earlier guidance, so the report itself was a relative success. Adjusted earnings rose 12% to $121.6 million -- or $0.16 a share -- ahead of analysts' estimates for the fourth quarter in a row.

Armed with 29.7 million active customers, Vipshop is making the most of its initial leadership position in dishing out flash sales on fashion items. The Shan Shan deal will help on many different levels, and it seems that all that investors need now is another blowout quarter out of Vipshop to remind them that it hasn't forgotten how to be a market darling.

The valuation is refreshing at this point. Vipshop is trading at a trailing earnings multiple in the low teens, and if we look out to 2020, we see the stock's earnings multiple dip into the single digits. There will be many factors that make the volatile stock move, and even some of Wednesday's sell-off could have nothing to do with the seemingly shrewd Shan Shan deal. Vipshop isn't likely to ever more than double again for three consecutive years, but it shouldn't take much to get the stock back on track after a year filled with mostly positive developments.