Vipshop stock price target lowered to $17.20 by BofA on soft apparel demand

Investing.com - BofA Securities lowered its price target on Vipshop Holdings (NYSE:VIPS) to $17.20 from $17.80 while maintaining a Buy rating ahead of the company’s second-quarter earnings report, scheduled for August 15. According to InvestingPro data, the stock currently trades at an attractive P/E ratio of 7.56, suggesting potential upside based on the platform’s Fair Value analysis.

The bank forecasts Vipshop’s Q2 net revenue at RMB25.8 billion, down 4.0% year-over-year, aligning with consensus estimates and the company’s guidance of -5% to 0%. This projection follows the company’s recent performance trend, with InvestingPro showing a 5.24% revenue decline over the last twelve months. The continued decline reflects soft apparel demand and decreased GMV in standardized categories due to increased promotions from larger competing platforms.

BofA projects a Q2 gross margin of 23.3%, lower than the 23.6% recorded in the same period last year, attributing the decline to more aggressive discounting this year. Non-GAAP net profit is estimated at RMB2.1 billion, in line with street expectations, implying a stable year-over-year non-GAAP net margin of 8.1%. Despite margin pressures, InvestingPro analysis shows the company maintains a "GREAT" financial health score of 3.24, with strong cash flow coverage of interest payments.

The bank notes that enhanced marketing and G&A efficiency should offset the lower gross margin and higher fulfillment costs stemming from increased return rates, though the rate of returns has slowed compared to last year.

BofA sees improved user engagement and apparel GMV trends in Q2 and expects this momentum to continue into Q3, potentially driving net revenues back to year-over-year growth given last year’s low base, with a forecast of 3Q25 net revenue growth of 1.2% year-over-year compared to consensus expectations of flat growth.

In other recent news, Vipshop Holdings reported first-quarter earnings that surpassed analyst expectations, with adjusted earnings per share reaching RMB4.66 against the consensus of RMB4.36. However, the company’s revenue fell short of projections, coming in at RMB26.3 billion compared to the expected RMB26.53 billion. This revenue miss was accompanied by disappointing guidance for the second quarter, with anticipated revenue between RMB25.5 billion and RMB26.9 billion, which is below current analyst estimates. Despite these challenges, Jefferies has maintained a Buy rating on Vipshop, with a price target of $18.30, citing the company’s ability to meet revenue expectations and deliver solid non-GAAP earnings.

Meanwhile, Citi has reiterated its Neutral rating with a $17 price target, expecting a 4.5% year-over-year decline in second-quarter net revenue. Benchmark also maintains a Hold rating, following a 5% year-over-year decline in first-quarter revenue and a 4% decrease in active customers. The company did see a resurgence in apparel sales and an 18% increase in SVIP membership, indicating strong customer loyalty. Despite the mixed performance, Vipshop’s margins have remained relatively stable, with management expressing cautious optimism about a recovery in Gross Merchandise Value.

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