Analysts Weigh In On Vipshop Holdings Ltd Following 1Q:15 Results

Analysts are weighing in on Vipshop Holdings Ltd – ADR (NYSEARCA:VIPS), after the Chinese online discount retailer reported positive first-quarter result, posting earnings of 13 cents a share, above consensus estimate of 10 cents a share. However, the company also issued a light guidance for the second quarter, sending shares down nearly 5% Thursday.

In a research report released Friday, Brean Capital analyst Fawne Jiang maintained a Buy rating on the stock with a price target of $30, which represents a potential upside of 19% from where the stock is currently trading.

Jiang wrote, “VIPS delivered strong 1Q results with both top- and bottom-line beat. The company provided slightly soft 2Q guidance, largely driven by slower customer growth YoY as the company scales back its group-buy business. We view it a hiccup and a result of trial and error in its customer acquisition efforts. We estimate that customer growth of its core flash sales business remains healthy and robust. As we start to lap group-buy impact in 3Q, we expect accelerated growth.”

“With the weeding out of lower quality customers and growth in better quality customers, we see an upward trend in repeat customers/purchase as well as the potential improvement for order size, which should also be the main drivers for continued long-term growth. Furthermore, with the scale-back of group-buy, we expect room for margin improvement (freeing up resources, e.g. logistics) in the coming quarters as well.”, the analyst added.

Piper Jaffray analyst Gene Munster took the same route, maintaining an Overweight rating and a $30 price target on the stock. The analyst noted, “The VIPS story has been a beat-and-raise and now is a beat-and-guide-down. We saw no fundamental reason for the guidance below the Street, rather the growth rate of the business is simply lower than the Street had expected. Overall, we continue to believe in the long-term (12-month) VIPS story and are maintaining our OW rating.”

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