Shares of Vipshop Holdings (VIPS 3.26%) slumped again on Thursday, losing as much as 10.6% before recovering some of its losses. As of 2:21 p.m. EDT, the stock was down 5.3%.
The Chinese e-commerce company plunged anew after a Wall Street analyst posited that its immediate future looks bleak.
Vipshop has had a rough year thus far and the bad times could continue. So says J.P. Morgan analyst Andre Chang, who downgraded the stock from overweight (buy) to neutral (hold), while slashing its price target in half, from $22 to $11, according to a report by The Fly.
It's important to note that the stock has already lost nearly 74% of its value since hitting a new all-time high earlier this year. Chang believes that even after this rout, Vipshop stock could have further to fall in the coming months, as challenges remain for the online retailer. The analyst is forecasting revenue growth of just 5% year over year in the second half, with margins plunging even further.
Several issues are feeding this bearish view. Chang says the "macro environment cool-down" that hit sales was worse than originally anticipated. Vipshop relies heavily on the sale of consumer discretionary and discount items for much of its business, and these sales were among the hardest hit. This has led to concerns about the sustainability of its user engagement. Additionally, Vipshop hasn't scaled back very much on its sales and marketing expenses, leading Chang to conclude that margins will be hit hard, at least over the short term.
Investors should keep in mind that Vipshop has been extremely volatile. In the three years following its initial public offering in 2012, the stock surged to $30, gaining more than 5,000%. It spent the next three years falling, plunging to less than $5 per share, before rocketing to more than $45 per share earlier this year.
If the pandemic has illustrated anything, it's that e-commerce isn't going anywhere. For investors who are sold on Vipshop's discount online retail strategy, this is just another bump in the long road ahead.