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Why Baozun Stock Popped Today

By Jeremy Bowman – Jun 2, 2020 at 10:55AM

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Shares of the Chinese e-commerce operator jumped on a strong earnings report.

What happened

Shares of Baozun (BZUN 0.48%) were moving higher today after the Chinese e-commerce services provider posted better-than-expected earnings results in its first quarter.

As a result, the stock was up 10.8% as of 10:24 a.m. EDT.

The word Baozun made up of the logos of its customers.

Image source: Baozun.

So what

Baozun said revenue rose 18.4% in the quarter to $215.2 million, beating estimates at $202.3 million, and higher-margin services revenue increased 22.9% to $116.2 million. Total gross merchandise volume, GMV, increased 17.6%, and the number of its brand partners, which include multinational companies like NikeStarbucks, and Microsoft, rose from 200 to 239. 

Profits, however, took a hit due to the impact of the coronavirus pandemic, which peaked in the first quarter in China. Adjusted operating margin narrowed from 5% to 2.4%, and it finished with an adjusted operating profit of $5.2 million. On the bottom line, it posted a per-share profit of $0.06, which was down from $0.13 per share a year ago but better than estimates at $0.02.

Management acknowledged challenges caused by the pandemic in the first quarter, but also said it strengthened its industry leadership during the period. CEO Vincent Qiu added, "As China's economic recovery strengthens in the second quarter, we believe the adoption of online retail will continue to accelerate going forward as brand partners increasingly prioritize their digital go-to-market strategies."

Now what

Looking ahead to the second quarter, the company was optimistic, calling for revenue growth of 20% to 23%, better than expectations of 19.5% growth, and it sees faster growth in the services segment. CFO Robin Lu noted that business was recovering from the pandemic, saying, "Since March, China's e-commerce sector has begun steadily recovering while the logistics industry has normalized, we are confident that we remain on track with our high-quality growth strategy and will reestablish growth in our non-GAAP operating profits in the second quarter of 2020."

Baozun stock has lagged behind its Chinese e-commerce peers like Alibaba and JD.com over the last year, but given the upbeat outlook, the stock could be primed to make up some of that gap.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Baozun, JD.com, Nike, and Starbucks. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Baozun, JD.com, Microsoft, Nike, and Starbucks and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Baozun Stock Quote
Baozun
BZUN
$6.28 (0.48%) $0.03
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$236.41 (-0.44%) $-1.04
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$84.28 (-0.62%) $0.53
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$96.29 (0.24%) $0.23
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$77.87 (-1.32%) $-1.04
JD.com, Inc. Stock Quote
JD.com, Inc.
JD
$52.66 (-1.27%) $0.68

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

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