Shares of Vipshop Holdings (VIPS -1.48%) have plummeted 39% since peaking three weeks ago. It's a big correction in a short window of time, but one analyst thinks that the Chinese online discounter of brand-name apparel and accessories is bottoming out here.

Andre Chang at JPMorgan upgraded Vipshop on Thursday, lifting his rating on the shares from neutral to overweight. He feels that Vipshop's nearly 40% plunge in recent weeks is tied to the collapse of Archegos Capital Management that resulted in the fire-sale liquidation of its stock portfolio that included Vipshop. Chang feels with the stock starting to inch higher again and trading volume returning to pre-sell-off levels that the playing field is finally level again. 

A rubber stamp that read 40% OFF in red ink.

Image source: Getty Images.

Back on track 

The $35 price target that Chang has on his bullish call wouldn't have been possible last month when the then-rising stock was approaching its peak of $46. The call offers reasonable upside here with Vipshop shares closing below $28 on Wednesday. 

The analyst feels that with revenue growth expectations recently reset to the more realistic mid-teens for the near future, Vipshop is a compelling purchase now. He sees it as cheaper than the other Chinese e-commerce plays, including peers that are growing even slower than Vipshop.

Vipshop is a profitable, cash-rich company that's currently trading at a revenue multiple that is barely above its enterprise value. Growth has decelerated sharply every year for more than a decade, but the climate is ripe for a bounce from the 9.5% top-line increase it posted for all of 2020. Wall Street sees 22% growth in 2021. 

The platform works. Selling brand-name merchandise at closeout prices is appealing in all economic environments. Investors were scared away a few months ago when Vipshop said that it would be emphasizing buyer growth over profit expansion -- a move that would mean growing market share at the expense of margin contraction -- but it's not necessarily a bad approach. Vipshop's balance sheet is flush with cash, so it can afford to invest in growth initiatives. 

Vipshop isn't exactly a household name for stateside investors and as China's sixth-largest e-commerce company getting to know it better may not seem like a priority. However, with the stock fetching just 16 times this year's projected earnings and less than 14 times next year's target it's a tempting value in e-tail for investors comfortable with the risks of investing in international stocks in general and Chinese equities in particular.

Retail apparel wasn't a hot ticket during the pandemic when folks sheltering in place didn't want to spring for new fashions, and even offering online discounted clothing wasn't immune to the lull. Thankfully China is well on the mend from the COVID-19 crisis. Year-over-year sales growth has accelerated for three consecutive quarters, and if the business is starting to bounce back, it's just a matter of time before this undervalued stock starts to follow suit.