May 15

This China Internet Sector Leader Nears Buy Point; Earnings Due

Don’t feel bad if you’ve never heard of Baozun (BZUN). The China-based stock stands poised 8% below a proper buy point ahead of its earnings report due Thursday.

When it comes to China internet stocks trading in the U.S., Baozun doesn’t have anywhere near the name recognition of a Baidu (BIDU) or an Alibaba (BABA).

But it does qualify as an IBD Sector Leader. And among non-China-based companies doing business over China’s internet, Baozun is a leading brand. The company’s website cites data from iResearch saying Baozun holds 22% of China’s e-commerce solutions market.

That is a big piece of business. China’s online population rose by 40.7 million connected users in 2017 to 772 million, according to the China Internet Network Information Center. The number is well over double the entire population of the U.S.

Baozun provides e-commerce systems to homegrown Chinese companies, as well as to non-China-based companies aiming to connect with China’s avid internet shoppers. It assists client/partners including Nike (NKE), Microsoft (MSFT) and Dutch consumer electronics and industrial products titan Philips (PHG). It helps market and deliver products via Chinese retail venues such as Alibaba’s Tmall and JD.com (JD).

In addition, it helps spin products and promotions across social media platforms, such as WeChat and Weibo (WB).

Baozun’s enterprise product suite covers essentially the entire e-commerce arc. From IT solutions and store operations, to digital marketing, customer services, warehousing and fulfillment. Markets range from apparel, electronics, insurance, automobiles, food and health products, and home furnishings.

The Triple-Digit Earnings Hurdle

The stock, which is listed on the Nasdaq, began trading on the U.S. market three years ago. It spent its first 15 months consolidating below its IPO price. It staged its first official breakout in May 2017. On Monday, the stock traded up 158% from that initial breakout. It was 339% above its IPO price.

For the first quarter, analyst consensus projects a 14% EPS gain to a modest 8 cents. The company has either met or beat analysts’ targets in the past four quarters. In the December quarter, Baozun topped earnings expectations by about 35%.

It also has grown earnings by triple digits in six of the past nine quarters. Consensus estimates point to a 10% rise in revenue. That would be down sharply from Baozun’s 25% average revenue gain over the past three quarters.

Shares on Monday were about 8% below a 52.43 buy point in an eight-week base. The base is a third-stage pattern. Baozun plans to report early Thursday.

Among the other China-based names set to report results this week: Vipshop Holdings (VIPS) and China Lodging (HTHT) report after Monday’s close. Tencent Holdings (TCEHY) and Canadian Solar (CSIQ) report Wednesday.


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