What happened

Chinese e-commerce company LightInTheBox Holding (NYSE: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. 

A figurine of a bull and a bear stand opposite of each other.

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.

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