Vipshop Holdings upgraded at Citi on continued improvements in revenue trends

Vipshop Holdings was upgraded to outperform by Citi on Monday, as the investment firm cited continued improvements in revenue trends for the Chinese e-commerce company.

Analyst Ashley Xu raised the firm’s rating on Vipshop Holdings to outperform from neutral, along with a $12 price target, noting that the company’s recent second-quarter results showed it can handle the ongoing economic uncertainty.

“While management cautiously guided 10-15% revenue decline for [third-quarter] in consideration of macro, Covid, and weather uncertainties, we expect a beat with 8% decline in [the third-quarter] and growth to flip to positive in [fourth-quarter],” Xu wrote in a note to clients. The analyst added that a “meaningful” sales recovery since June, stabilization of the number of users, its SVIP program and continuing to improve the product should all help the company.

Vipshop Holdings shares rose more than 0.5% to $10.05 in premarket trading.

In addition, Xu noted that Vipshop Holdings has continued to streamline its cost structure, having stopped offering self-subsidized coupons and has continued to improve its marketing spending.

As a result, Xu raised her earnings per share estimates for 2022 to 2024 by 12% to 23%.

For the third-quarter, Vipshop Holdings expects revenue to between RMB21.2 billion and RMB22.4 billion, representing a year-over-year decrease rate of ~15% to 10%, compared to an estimated decline of 14.03% year-over-year.

Author: Chris Ciaccia, Seeking Alpha

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