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HSBC cuts Vipshop stock target, maintains hold rating

EditorAhmed Abdulazez Abdulkadir
Published 28/03/2024, 12:40

On Thursday, HSBC (LON:HSBA) made an adjustment to the price target of Vipshop Holdings (NYSE:VIPS), a leading Chinese online discount retailer. The firm reduced the target to $19.00 from the previous $22.90, while keeping a Hold rating on the stock.

This revision reflects concerns over the company's first-quarter performance in 2024, with HSBC anticipating a slowdown in growth rate due to several factors, including tougher year-over-year comparisons, a continued decline in monthly and daily active users, and macroeconomic uncertainties that may affect order frequency.

The analyst pointed out that the 38 shopping festival's lackluster performance and unexpectedly cold weather in March negatively impacted sales of spring apparel, which in turn has led to a subdued outlook for the first quarter of 2024. Despite an expected sequential improvement in product return rates after the promotional season, there is still an upward trend year-over-year, indicating a more cautious consumer spending behavior.

HSBC has consequently revised its revenue projections for Vipshop from 2024 to 2026 downwards by approximately 2%, with earnings for the same period anticipated to decrease by a similar margin.

The resilience of margins is expected to remain, supported by disciplined sales and marketing cost control. The new discounted cash flow (DCF) target price takes into account a higher 5-year weekly beta and a lower terminal growth rate, suggesting around an 18% upside and a price-to-earnings ratio of 7.4 times for the year 2024.

Despite these adjustments, Vipshop continues to demonstrate a commitment to shareholder returns, as evidenced by its annual dividend policy, which yielded a 2.5% return in 2023. Additionally, the company has an unused share buyback quota amounting to $548 million valid until March 2025, which represents approximately 6% of its current market capitalization.

InvestingPro Insights

In light of HSBC's revised price target for Vipshop Holdings, current InvestingPro data and tips provide a broader perspective on the company's financial health and market position. Vipshop's market capitalization stands at $8.74 billion, and it boasts a price-to-earnings (P/E) ratio of 7.92, indicating the company is trading at a low earnings multiple relative to its last twelve months as of Q4 2023. This aligns with the InvestingPro Tip that Vipshop is trading at a low P/E ratio in comparison to its near-term earnings growth.

InvestingPro also highlights Vipshop's strong cash position, with more cash than debt on its balance sheet, which could provide financial flexibility in uncertain macroeconomic times. Additionally, the company's revenue grew by 9.41% over the last twelve months as of Q4 2023, reflecting its ability to increase sales despite market challenges. With a robust gross profit margin of 22.79% in the same period, Vipshop shows resilience in maintaining profitability.

For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, including insights on Vipshop's status as a prominent player in the Broadline Retail industry and its stock performance over various timeframes. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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