What happened
Chinese e-commerce company LightInTheBox Holding (LITB) reported results for the second quarter of 2020 demonstrating impressive revenue growth and profitability. And investors apparently loved the report before the market opened. The stock opened 26% higher than where it closed the day before.
However, LightInTheBox stock has been free-falling since, down 8% as of 11 a.m. EDT.
Image source: Getty Images.
So what
LightInTheBox sells directly and ships directly from its e-commerce sites, and operates multiple countries. Due to customer retention, new customer acquisition, and increased spending from existing customers, Q2 revenue surged 96% year over year to $114 million. While e-commerce got a boost from the COVID-19 pandemic, not all e-commerce companies saw this level of growth.
Furthermore, LightInTheBox turned in a profitable quarter. Q2 net income was $8.5 million, compared to a net loss of $7.3 million last year. The company attributed the marked improvement to a strategy shift in recent quarters. It's now focused on selling higher-margin products, which boosts the bottom line.
Now what
It was a very strong quarter for this small-cap company, making LightInTheBox stock's volatility puzzling. In the earnings call, management didn't offer a warning or downside guidance. However, there was uncertainty in the guidance for the third quarter. It expects net revenue of $95 million to $110 million, representing year-over-year growth between 59% and 83%.
That's a very wide range and it possibly injected enough uncertainty to motivate shareholders to take some profits off the table -- the stock traded under $1 per share earlier this year.
