Please ensure Javascript is enabled for purposes of website accessibility

Why Vipshop Stock Got Crushed Today

By Jon Quast – Aug 19, 2020 at 2:27PM

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

Revenue growth and guidance were modest, likely missing investors' expectations.

What happened

Shares of Vipshop Holdings (VIPS -1.32%) got crushed on Wednesday after the company reported results for the second quarter of 2020. The Chinese e-commerce company did demonstrate revenue growth in Q2. But investors probably expected greater acceleration due to the COVID-19 pandemic.

Furthermore, guidance for the remainder of 2020 failed to impress, leading investors to book gains from a Vipshop stock that was already up around 70% year to date.

VIPS Chart

VIPS data by YCharts

So what

Investors don't talk about Vipshop much, but it's the sixth largest e-commerce company in China, according to eMarketer. E-commerce has been a big story in 2020, as the coronavirus pushed consumers toward online channels. That being the case, investors had big expectations for Vipshop's business in Q2.

Vipshop's Q2 revenue, however, only grew 6% year over year to $3.4 billion. While that wasn't as high a growth rate as many other e-commerce companies, it far exceeded its own guidance. Management had guided for 5% revenue growth at the high end. So the company did indeed receive a coronavirus bump. 

Furthermore, Vipshop grew its net income 89% year over year to $218 million. Considering the company beat revenue guidance and expanded the bottom line, one would have expected the stock to rise. And that may have been the case, if the company hadn't given lackluster guidance.

A frustrated man puts his hands on his face with a down stock chart in the background.

Image source: Getty Images.

Now what

CEO Eric Shen said, "We believe that we are well positioned to continue to gain market share in China's discount retail segment." However, it appears any market-share gains will be modest for now. For the upcoming third quarter, Vipshop management only expects revenue to grow 5% to 10% year over year. 

A final note that could be effecting Vipshop stock today: The company's CFO will be stepping down in November for personal reasons. This is completely normal and doesn't mean investors should be suspicious. But they might be jumpy considering this is an international stock. Vipshop is a Chinese company and financial results are unaudited.

Since the CFO's resignation isn't effective immediately, I'm not inclined to worry about anything fishy going on. But it's worth acknowledging some investors might be playing it more safe than sorry.

Jon Quast 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

Vipshop Holdings Stock Quote
Vipshop Holdings
VIPS
$8.94 (-1.32%) $0.12

*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
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

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.