Vipshop Holdings - ADR (NYSE:VIPS) has lost its spark with investors as it continues to hit lower lows in the wake of disappointing second quarter earnings. A number of equity firms have already downgraded the Chinese online discounter, amidst concerns of slowing revenue and earnings growth as well as narrowing gross margin.
Stock Decline
The stock is currently trading at discounted levels and close to a 52-week low of $8.72 a share. Vipshop is down by more than 30% for the year as investors question its long term growth prospects. The stock is currently trading in a negative territory a sharp contrast to previous years, where it was a market darling.
Vipshop reported a 30% increase in revenue in Q2 that came in at $2.58 billion. Revenue came in at the high end of a 26% to 30% growth that the company was expecting. However, the double digit revenue growth did not have the desired impact on earnings per share.
Earnings of $0.17 a share for the second quarter fell short of Wall Street expectations of $0.19 a share. The miss marked the first time in more than a year that Vipshop has failed to meet Wall Street expectations. Gross Margin declined due to an increase in promotional activities as the company seeks to strengthen its market share.
Lower profitability according to rating firm Moody’s reflects the challenges that Vipshop continues to face as it tries to grow its scale. Competitive Chinese e-commerce market is one of the challenges that continue to pound the retailer.
Institutional Holding
The earnings miss has already triggered reactions from institutional investors some of whom have started to trim their stakes in the company. Morgan Stanley has trimmed its position in the company to 1.79 million shares from 7.72 million shares, held as of June 27, 2017. The firm’s stakes represent a 1.7% stake.
Capital Fund Management, on the other hand, acquired 856,855 shares in the technology stock company in the second quarter valued at $9,040,000. Franklin Resources raised its stake in the firm by 23.4% in the quarter and now owns 10,714,153 shares.
Comgest is one of the biggest shareholders in Vipshop with stakes worth 24.7 million shares valued at about 260 Million. It is followed closely but FMR Llc which owns about 22.52 million shares valued at about $237.61 million shares. Hedge fund Blackrock owns 17.99 million shares worth $189.84 million.
Equity firms have also initiated coverage of Vipshop stock following the disappointing second quarter results. BidaskClub currently rates the stock as a strong ‘sell’. Daiwa Capital Markets downgraded the stock to a ‘hold’ from a ‘buy’.
