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Why Baozun Stock Pulled Back Today

By Jeremy Bowman - Updated Jan 27, 2021 at 4:28PM

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Yesterday's gains were reversed.

What happened

Shares of Baozun (BZUN 5.76%) were falling today, one day after the stock surged on news of a partnership with iClick Interactive Asia Group and on an apparent short squeeze.

There was no news out on the stock today, meaning the 10.3% slide was likely a correction from yesterday's 35% gain.

The word "Baozun" made from its customers logos

Image source: Baozun.

So what

It's been a bizarre week on the market as several heavily shorted stocks like GameStop and AMC Entertainment have gone through the roof due to massive short squeezes executed by traders on platforms like Reddit.

Yesterday, Baozun seemed to benefit from similar behavior with a likely short squeeze driving the stock up as shares popped on heavy volume. As of the end of December, about 20% of Baozun's float had been sold short.

Today, Baozun, which provides e-commerce services like fulfillment and marketing for multinational companies in China, fell as the broader stock market pulled back as well, perhaps on fears that prices have become inflated and divorced from fundamentals, especially given the extreme short squeezes. Comments from Fed Chair Jerome Powell about moderating economic growth also seemed to push stocks toward closing.

Now what

It can be difficult for investors to tune out noise at a time like this, but that's the best thing to do here. While the partnership with iClick -- a Chinese digital marketing technology company -- seems to be a step in the right direction for Baozun, it did not justify a 35% jump in the stock, so today's correction seems warranted.

Baozun mostly missed out on the boom in e-commerce stocks last year, but a strong fourth-quarter report could be a catalyst when it comes out in March. Analysts see revenue growing 32.6% and earnings per share increasing from $0.38 to $0.54.

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Stocks Mentioned

Baozun Stock Quote
$8.08 (5.76%) $0.44
iClick Interactive Asia Group Limited Stock Quote
iClick Interactive Asia Group Limited
$0.72 (-1.66%) $0.01

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

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