Vipshop Q1 Shows Triple-Digit Growth

seekingalpha.com/article/...-3-things-that-matter-most-in-2015

Will costs eat away at profits, or be controlled?
How will VIPS fare against more direct competition against the likes of JD and BABA?
What is a reasonable price target for VIPS in 2015?

Since Vipshops 2012 IPO, it has been the best performing stock in the market with gains of more than 3,500%. In essence, it has been quite a turnaround for a company that failed to attract much pre-IPO excitement, raising 39% less than sought during its IPO. While its revenue growth has been exceptional, and unexpected, it is also a stock whose gains make it extremely vulnerable to potential stock loss. Therefore, here are three of the most important factors that will dictate 2015 for Vipshop's stock, and how it will likely perform....

Specifically, with Alibaba's Tmall and JD.com controlling nearly 80% of the B2C market, Vipshop's ability to grow revenue at a rate that exceeds the broader industry in 2015 will come down to its ability to steal some market share from its dominant competitors...In other words, if Vipshop is to meet revenue growth expectations of 66% next year, it must start chipping away at the big boys.
Vipshop has built its business by having registered customers, those that continue to use its flash-selling, bargain price services. In 2013, nearly 64% of Vipshop's customers were repeat customers, and 93% of orders came from current subscribers. Therefore, Vipshop has done well keeping current customers happy, but it must still grow its new customer base significantly larger to maintain lofty growth rates.During its third quarter, active customers increased 136.8% to 9.5 million. Thus, the growth is impressive....

The reason Vipshop has been able to stay profitable over the last two years is because of the somewhat unique way it operates. Vipshop buys its products in bulk from select retailers and designers. It then sells and ships those purchased products in bulk. By doing so, it acquires goods at a discounted price, can sell at a deeply-discounted price and save costs shipping in bulk. This has allowed Vipshop to find consistent profits in an industry that's well-known for low margins.

....So far, Vipshop is showing no cracks in its growth armor, but having to compete against Alibaba and JD.com on a larger scale is certainly a risk. Specifically, what happens when Alibaba and JD.com view Vipshop as a legitimate threat? Can Vipshop weather the storm created if either competitor attacks its flash-selling model or intentionally undercuts the prices?

...In fact, I don't think there's another company in the market with expected revenue growth of 65% plus for 2015 trading at under 40 times next year's earnings. That said, because of Vipshop's revenue growth, its profits and the expected growth of China's e-commerce industry itself, I'd certainly pay 50 times next year's earnings for the stock.... a 150% premium to earnings in exchange for 66% growth seems ideal, putting the price target at $26.
.....In other words, Vipshop is a high-risk, high-reward investment. However, if Vipshop can maintain its current trajectory, and prove that it can become a legitimate threat to JD.com and Alibaba in 2015, its stock could double many times over the next several years.