Is Vipshop a victim of accelerated sell or just a weak stock after disappointing earnings?

on Feb 28, 2022
  • Vipshop stock has plummeted from $45 to $7.5 in less than a year.
  • The company announced falling earnings customers and issued low guidance.
  • Stock is depressed below $10.

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When Vipshop Holdings Limited (NYSE:VIPS) reported revenue of RMB117.1 billion in FY21, increasing 14.9% from the previous year, the stock fell 10%. Quarterly sales trends showed a decline, with Q4 2021 revenue of RMB34.1 billion, below RMB35.8 billion in Q4 2020.

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The company also said that its revenue in Q1 2022 would be lower at between RMB27.0 billion and RMB28.4 billion. 

Not only did Vipshop’s earnings fall, but its customers did too. The active customers in the fourth quarter were reported at 49.2 million, below 53.0 million in the prior year.

The gross merchandise value showed slowdowns for the discount retailer in the wake of the tightening economy. However, the Vipshop market segment holds a significant value proposition due to the demand for discounted branded items.

At the current level of around $9, Vipshop trades at a massive discount compared to its previous top of $45 in March 2021. Considering the massive fall, investors’ caution could have prevailed in the wake of escalating tensions between Beijing and Washington.

As investors keep off the Chinese stocks and pandemic boosts wane, Vipshop may maintain at depressed levels. Nonetheless, it is not an outright sell.

Vipshop remains suppressed below $10

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Source – TradingView

From a technical perspective, $10 remains the established level for VIPS, coinciding with price action and 100-day MA. The stock is trading below the resistance and MAs, reflecting the weak sentiment. With immediate resistance above, VIPS is open to further weakness, setting the recently touched level of $7.5 the potential support. The stock could also trade higher if the current sentiment improves.

Final thoughts

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Vipshop can fall further if it does top the $10 resistance. The stock has been suffering from investors’ caution due to China-US trade wars and declining pandemic boosts. Recently announced results, which showed a decline, are also weighing on the stock.

Nonetheless, Vipshop is trading at a massive discount. A buy trade can be taken if the stock clears the $10 level, with a cross-over of the 50-MA over the 100-MA.

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