Vipshop Advances as 26% Retreat Lures Buyers on ValuationMeng Meng
Vipshop Holdings Ltd. rose for the first time in four days as JG Capital said a selloff that pushed the online fashion retailer’s valuation to a 10-month low provided a buying opportunity for some investors.
The Guangzhou-based company’s American depositary shares climbed 3.6 percent yesterday, rebounding from an 11 percent slide over three days. E-Commerce China Dangdang Inc., a smaller online retailer, added 3.4 percent, the most in eight weeks. The Bloomberg China-US Equity Index slipped 0.2 percent.
Traders bought the stock after Vipshop, which sells fashion goods at deep discounts, plunged 26 percent in the two months to Oct. 13 on concern its valuation premium over Alibaba Group Holding Ltd., China’s largest e-commerce company, is unwarranted. Prospects for a boost to Vipshop’s revenue from sales on Singles’ Day, a Chinese version of Valentine’s Day that falls on Nov. 11, is also luring buyers, said Henry Guo, a San Francisco-based analyst at JG Capital.
“Investors see a cheap valuation, and they are buying in at this point” Guo said by phone yesterday. “Investors are betting on growth in their fourth-quarter results.”
Vipshop climbed to $176.70 yesterday. The stock trades at the lowest valuation since December, about 40 times 12-month forward earnings, which is down from a high of 70 in March and compares with a multiple of 32 for Alibaba, data compiled by Bloomberg show. The Shanghai Composite Index slid 0.1 percent to 2,358 at 11:16 a.m. local time today.
Sales at Vipshop jumped 125 percent in the third quarter from a year ago, according to the mean of nine analyst forecasts compiled by Bloomberg. The retailer is at an advantage because it sells merchandise that’s not offered on Alibaba’s Taobao marketplace, Guo said.
The iShares China Large-Cap ETF, the biggest Chinese exchange-traded fund in the U.S., added 0.2 percent to $38.11. The Standard & Poor’s 500 Index rose 0.2 percent after erasing most of an earlier rally led by industrial companies, airlines and banks. Dangdang advanced to $10.39 while Hangzhou-based Alibaba slumped 0.2 percent to $84.95. The Bloomberg China-U.S. gauge slipped to 105.30.
The Hang Seng China Enterprises Index fell 0.3 percent to 10,254.79 to the lowest since June 25. The Shanghai Composite Index dropped 0.3 percent to 2,359.48.
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