Citi updated its outlook on Vipshop Holdings (NYSE:VIPS), increasing the price target to $18.00 from the previous $15.00 while sustaining a Buy rating on the shares. The firm anticipates that Vipshop will report its third-quarter earnings for 2024 in mid-November and predicts revenues might touch the lower end of the company's guidance, which ranges from a 5% to 10% decline.
The revision reflects a continued trend of soft demand following seasonal promotions and a relatively warm September, which lasted until the final days of the month. Consequently, Citi has adjusted its revenue projections downward by 2.6%, forecasting a 9.6% year-over-year decrease for the third quarter, compared to an earlier estimate of a 7.5% decline.
In addition to revenue adjustments, Citi also reduced its non-GAAP net profit forecast for the third quarter by 6.2%. This change accounts for the softer revenue expectations and the impact of foreign exchange fluctuations.
Despite the anticipated weak third-quarter performance, Citi believes that positive policy measures aimed at boosting consumer confidence could overshadow the tepid results. Investors are expected to focus more on the fourth-quarter guidance and outlook, as they look beyond the third-quarter's shortcomings.
The new price target of $18.00 is based on an 8x multiple of the estimated 2025 earnings per share (EPS) of $2.26, an increase from the previous 7x multiple. Citi maintains its Buy rating on Vipshop Holdings, signaling continued confidence in the stock despite the short-term challenges.
In other recent news, Vipshop Holdings, a leading online discount retailer, has been the subject of various analyst revisions and internal changes. HSBC has reduced its price target for Vipshop to $14.20, maintaining a hold rating due to anticipated challenges in consumer demand. The firm expects a roughly 10% year-over-year decline in revenue for the second half of 2024. HSBC also revised its revenue and earnings estimates downwards for the years 2024 to 2026.
JPMorgan reaffirmed its Overweight rating on Vipshop, suggesting limited downside risk for the stock's price based on current valuation. The firm anticipates Vipshop's share price will find support from an expected 10% or higher annualized shareholder return. Meanwhile, CLSA downgraded Vipshop's stock from Outperform to Hold, adjusting the price target to $12 from the previous $15.80.
Vipshop's second-quarter 2024 performance showed a 3.6% year-over-year decrease in total revenue, amounting to $26.9 billion, and an adjusted net profit of Rmb2.2 billion. The company's third-quarter guidance suggests a further revenue decline of 5-10% year-over-year. However, Vipshop announced a $1 billion share buyback program, demonstrating its commitment to shareholder value.
Vipshop announced a change in its leadership, with Mike Li succeeding Tao Feng as the new Chief Technology Officer. This leadership transition and the recent analyst assessments reflect the ongoing developments within Vipshop Holdings.
InvestingPro Insights
As Vipshop Holdings (NYSE:VIPS) gears up to report its third-quarter earnings, real-time data from InvestingPro provides a broader financial context for investors. The company currently holds a market capitalization of $8.15 billion, with a P/E ratio that stands at an attractive 5.96, suggesting that the stock could be undervalued relative to its earnings. Additionally, Vipshop's adjusted P/E ratio for the last twelve months as of Q2 2024 is 6.71, reinforcing its position as a potentially undervalued stock in the market.
InvestingPro Tips highlight that Vipshop is trading at a low revenue valuation multiple and has a significant return over the last week. These insights may be particularly relevant for investors considering Citi's updated outlook and the anticipation of the company's third-quarter earnings. With a strong return over the last month and the last three months, Vipshop's performance is noteworthy, despite the predicted revenue decline for the quarter.
Analyzing the company's financial health, it is notable that Vipshop holds more cash than debt on its balance sheet—an InvestingPro Tip that could signal a strong financial position. For investors looking for more in-depth analysis and additional tips, there are a total of 10 InvestingPro Tips available, providing a comprehensive view of Vipshop's financial landscape and future potential.
InvestingPro's fair value estimate for Vipshop stands at $19.47, slightly above the price target set by Citi, suggesting that the stock might have room to grow. With these insights, investors can make a more informed decision on whether Vipshop Holdings aligns with their investment strategy as the company navigates through the current market conditions.
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