Vipshop Holdings Ltd – ADR (VIPS) Gain Shows The Strength Of T.J. Maxx Model

vipshop

Vipshop Holdings Ltd – ADR (NYSE:VIPS) shares have surged a staggering 2789% since it went public in March 2012. Last week alone, the shares gained 27% in New York trading. According to Bloomberg, shares of the Chinese online fashion retailer have surged in 17 of the past 19 months. The rally was driven by rising demand for its marked-down Nike T-shirts and Anne Klein raincoats. Intercept Pharmaceuticals Inc (NASDAQ:ICPT) is the only U.S.-listed stock above a $100 million market cap that has outperformed Vipshop.

Analysts raise price target after Vipshop beats estimates

Vipshop Holdings Ltd – ADR (NYSE:VIPS)’s business model is same as those of T.J. Maxx and Ross Stores, Inc. (NASDAQ:ROST). It sells excess inventory at cheaper rates. Last week, the Guangzhou, China-based company said its fiscal fourth quarter revenues soared 117.3% to $651 million. The total number of orders surged 102.4%, and the number of total active customers increased by 119.5%. Vipshop’s gross profit jumped by 131.9% to $159.4 million.

The Chinese company has build a reputation for beating estimates. During the latest quarter, the company had issued earnings guidance of 37 cents a share, but actual earnings came at 43 cents. Its strong growth prompted Deutsche Bank and HSBC analysts to raise their price targets on the stock. Vipshop shares have gained 92% this year so far, after rising 369% in 2013.

Vipshop still has immense growth potential

Oberweis Asset Management analyst Jeff Papp says that China lacks stores like T.J. Maxx and Ross Stores, Inc. (NASDAQ:ROST). So, Vipshop Holdings Ltd – ADR (NYSE:VIPS) is filling that gap with flash sales of brand apparel. China has more than 618 million Internet users as of the end of 2013. The number of online shoppers grew 25% YoY to 302 million in 2013. HSBC analyst Chi Tsang said that the company has immense potential to keep growing. Tsang raised his price target on the stock by 29% to $162 last week. Meanwhile, Deutsche Bank raised its price target from $134 to $184.

Vipshop Holdings Ltd – ADR (NYSE:VIPS) shares were down 5.22% to $157.86 at 12:23 PM EDT.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

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