Consideration #2: Vipshop Has Large Appeal
While I believe LightIn TheBox shares have fallen below a fair valuation of the company, there are some significant risks that investors should take into account. I encourage prospective investors to research LightIn TheBox further before initiating a long position in the stock.
LightIn TheBox’s management has openly admitted that the company’s high-end business model did hurt sales in the last quarter. Vipshop Holdings Ltd – ADR (NYSE:VIPS) has successfully been able to market more to the middle class. While Vipshop did offer a slightly softened outlook for the rest of 2013, it posted very robust numbers in the last quarter.
What’s good about this is that LightIn TheBox’s management has recognized the problem and is hopefully working on the solution to that problem. Vipshop Holdings Ltd – ADR (NYSE:VIPS) and E Commerce China Dangdang Inc (ADR) (NYSE:DANG) mainly have their operations centered in China anyway, while as already mentioned LightIn TheBox derives most of its revenue from overseas. What is bad about this is that LightIn TheBox could lose the massive Chinese market to Vipshop Holdings Ltd – ADR (NYSE:VIPS) and E Commerce China Dangdang Inc (ADR) (NYSE:DANG) if management doesn’t focus on developing its domestic operations.
Conclusion
If you want to effectively play the Chinese e-commerce market for the long haul, I would encourage you to take a look at both Vipshop Holdings Ltd – ADR (NYSE:VIPS) and LightIn TheBox. E Commerce China Dangdang Inc (ADR) (NYSE:DANG)’s 30% run-up over the past year might not be sustainable if the company can’t come out of the red. What Dangdang proved in the last quarter is that it is narrowing the gap and might soon return to the black, but LightIn TheBox and Vipshop Holdings Ltd – ADR (NYSE:VIPS) are already in the black, and thus far ahead of E Commerce China Dangdang Inc (ADR) (NYSE:DANG)’s game.
I do believe Mr. Market has unfairly punished LightIn TheBox since expectations got too carried away and many investors have become short-sighted about long-term priorities. Remaining LightInTheBox investors should hold onto their shares for the time being. Macroeconomic improvements in Europe’s economy will also hopefully boost LightIn TheBox’s bottom line. If you’re in for a volatile ride that might produce big returns in the future, then LightIn TheBox and Vipshop are the stocks for you.
The article 2 Long-Term Plays on Chinese E-Commerce originally appeared on Fool.com and is written by Evan Buck.
Evan Buck has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
