On Friday, Morgan Stanley (NYSE:MS) adjusted its outlook on Vipshop Holdings (NYSE:VIPS) shares, reducing the price target to $18 from the previous $20 while maintaining an Equalweight rating on the stock. The adjustment reflects a revision of earnings estimates for the years 2024 to 2026, taking into account lower margin expectations for the company.
The firm's analysis indicates that Vipshop's Gross Merchandise Volume (GMV) for the first quarter of 2024 is projected to grow by 9% year-over-year, which lags behind the industry's growth. National Bureau of Statistics (NBS (LON:NBS)) data shows online apparel sales increased by 12.1% year-over-year in the same period, suggesting Vipshop is facing competitive challenges.
The slower GMV growth expected for Vipshop in 2024, combined with a steady high return rate of over 30% in the apparel category, leads to a prediction of reduced operating leverage for the company compared to 2023. This anticipated change in operating dynamics is a contributing factor to the revised margin outlook.
As a result of these factors, Morgan Stanley foresees potential downside to Vipshop's margins. The new price target of $18 implies a 7.7x non-GAAP P/E ratio for the year 2024, as per the firm's estimates. This target adjustment comes amidst a broader analysis of the company's financial health and market position.
InvestingPro Insights
In light of Morgan Stanley's recent review of Vipshop Holdings, real-time data from InvestingPro provides additional context for investors considering the stock. Vipshop's market capitalization stands at $8.22 billion, with a trailing twelve-month P/E ratio of 7.3, which is below the industry average, signaling a potentially undervalued stock. The company's PEG ratio for the last twelve months, as of Q4 2023, is just 0.16, suggesting that its earnings growth may not be fully reflected in its current share price.
InvestingPro Tips indicate that Vipshop holds more cash than debt on its balance sheet, a sign of financial stability, and the stock's Relative Strength Index (RSI) suggests it is currently in oversold territory. Moreover, Vipshop is recognized as a prominent player in the Broadline Retail industry, and analysts predict the company will remain profitable this year, having been profitable over the last twelve months.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available for Vipshop. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full potential of your investment decisions. With 5 more tips listed on InvestingPro, you can gain a comprehensive understanding of Vipshop's market position and future outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.