Vipshop (VIPS) Not Viewed As A “very important” Stock Today After Lowering Q4 Revenue Guidance

3:04 pm Tuesday, December 28th, 2021

Investors are not viewing Vipshop (NYSE:VIPS) as a “very important” stock today after the Chinese-based e-commerce company lowered its Q4 revenue guidance. VIPS now expects Q4 revs of RMB 34.0-35.8 bln, down 5% at the midpoint from its prior guidance of RMB 35.8-37.6 bln.

Reasons were unclear, as VIPS only cited that market and operational conditions have changed. However, as China still grapples with COVID-19, locking down cities where outbreaks have occurred, VIPS is more than likely seeing softening demand levels. Its larger competitor, JD.com (JD -2%), is also ticking lower on VIPS’ updated outlook.

December has proven to be a harsh month for many Chinese companies. For example, JD was starting to climb back to all-time highs in November, only to see a pronounced sell-off after a series of bad news from its peers. Although VIPS shares have been suppressed throughout most of 2021, they also started to crawl upwards in November.

One of the early warning signs came from Baozun (BZUN), which posted a sizeable Q3 earnings miss. BZUN gives business owners the tools to create an online shopping presence in China and is deeply integrated with mammoth Chinese e-commerce companies such as Alibaba (BABA), Pinduoduo (PDD), and JD. As such, missing on earnings by such a wide margin signaled to investors that Chinese e-commerce companies may be struggling.

Later that week, DiDi Global (DIDI) stated it would delist its shares from the NYSE as regulatory pressures by the US SEC as well as in China grew. The news DIDI would delist was another blow to Chinese companies; VIPS shares fell about 9%.

VIPS stock now trades over 70% lower on the year and ~82% lower from all-time highs in late March. With this challenging year nearly in the rear-view mirror, VIPS can set its sights on a turnaround in 2022. The stock has also been beaten down, trading around 5x forward earnings, giving it a reasonable valuation. However, given the intensifying regulatory pressures VIPS is facing as well as ongoing COVID-19 concerns, it may be better to wait until these conditions begin showing signs of improvement before investing in VIPS.