| Stock (Symbol) | Stock Price | |
Vipshop (VIPS) |
$25 |
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| Data is as of | Expected to Report | Sector |
May 29, 2015 |
Aug 14 – Aug 15 |
Retail & Travel |
| Sharek’s Take | ||
 Vipshop has been accused of financial fraud by short sellers. The online retailer is accused of overstating revenue by reporting gross sales instead of the net it makes off each purchase (it is upfront to everyone it uses gross sales), commingling inventory on consignment with that it purchased, and achieving cash flow by taking funds from customers right away but not paying suppliers many weeks later. The news hasn’t really hurt the share price, as VIPS was around $28 before the news and $25 now, but on the days VIPS falls its on high volume and when it rises its on low volume which signals institutions are selling. I originally purchased the stock for my investors for $9 in 2013, and it is still a very profitable investment but this is a very big concern to me, as VIPS was my largest holding. To alleviate risk, I sold half of each client’s position. We probably won’t get resolution for many months or perhaps years, and this news will likely keep VIPS from moving significantly higher in the near term. |
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| One-Year Chart | ||
 One year chart is still beautiful. Stock trying to gain support at $25. Profit growth has been triple-digits the past 4 qtrs, and I think that will continue next qtr too. Profits have soared every year and are expected to climb 76% a year in the long-term. Lots to like here. |
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| Earnings Table | ||
 Sales grew 100% last quarter as profit growth was 117%.VIPS beat the street by 2 cents a share, and has made more profit each qtr on a consecutive basis the past 2 years. Annual Profit Estimates only increased a little bit, as has been the case for a year now.Quarterly profit growth shows solid growth ahead for the next year, but these estimates didn’t increase. |
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| Fair Value | ||
 Due to the increased risk, I’m taking my Fair Value P/E from 60 to 50. My calculations show VIPS to be worth $28 and that sounds about right. Upside to 2016 is substantial if this story dissipates. |
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| Ten-Year Chart | ||
 Ten year chart still looks great. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
4 of 22 |
Vipshop’s numbers continue to shine, but the fraud accusation is putting a cap in on the near term upside. I recommend investors sell half their position to lower risk. The stock seems to be holding up well considering, but I’m concerned that VIPS sells off on high volume/rises on low volume. I’m dropping my ranking on VIPS down from 1st to 4th in the Growth Portfolio Power Rankings as there really isn’t a lot of great growth companies to put above it. VIPS also ranks 4th in the Aggressive Growth Portfolio Power Rankings but I may remove it from this portfolio if the stock falters. |
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Aggressive Growth Portfolio
4 of 8 |
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