Shareholders of Yatsen Holding (YSG), the Chinese beauty products company, beat the market on Friday. The stock jumped 14% by 3:30 p.m. ET, compared to a flat performance by the S&P 500. The rally added to big gains for the stock, which has jumped by more than 200% in the past month.
Friday's surge appears to be tied to that broader move higher, rather than to any specific news from the company.
Yatsen Holding is a small-cap international stock, with a market capitalization of about $1.3 billion today. Those factors alone help explain why its share price can swing wildly over short time periods.
That volatility is amplified by the fact that the beauty company's stock collapsed by roughly 90% in the 12-month period that ended in early June. That decline was powered in part by the company's disappointing earnings report in mid-March.
Friday's stock price rally makes more sense in that context of the stock recovering some ground following a deep decline over the past year.
Yatsen Holding's late May earnings update didn't do much to ease investors' fears about the business. Sales declines accelerated to 38%, in fact, and net losses continued into the fiscal first quarter. Management cited weak demand for makeup in China and the resurgence of COVID-19 lockdowns as major pressures.
It's good news that Yetsen Holdings was able to reduce its net losses despite that historic strain on the business. And the company's makeup and skincare demand should rebound as lockdowns are lifted around China.
Yet investors should expect much more volatility ahead for this stock, including potential sharp downturns. The growth rebound could be impressive once the Chinese beauty product industry emerges from lockdown pressures. However, investors should wait for more concrete signs of that rebound before concluding that Yatsen stock is an attractive holding.