Baozun looks to bounce after post earnings selloff
Chinese internet firm Baozun (Nasdaq: BZUN) reported earnings on August 21. The company reported earnings of $0.20 on revenue of $248.2 million. Both of those figures were better than the consensus estimates and both were better than the results from a year ago. Despite beating on both the top and bottom line and seeing year over year increases in earnings and revenues, the stock fell sharply. In fact the stock dropped 12.6% on August 21.
This was a little puzzling to me and I started looking back at the last couple of earnings reports. That’s when I noticed a pattern. When the company reported earnings on March 6, it beat earnings estimates and revenue estimates, but the stock fell 17.7% from the close on March 5 to the low on March 8. The stock would turn things around and rally by over 50% within the next two months.
The company reported earnings again on May 29 and once again it beat estimates on both the top and bottom line. The stock didn’t drop this time around, but it also didn’t gap higher. The stock would rally by over 50% in just over a month.
I also took note of a trend line connecting the December low with the low from May and the stock just hit this trend line late last week—two days after its earnings report.
Looking at the Tickeron Technical Analysis Overview for Baozun we see that the stochastic indicators were in the oversold zone for 3 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an uptrend is expected. The indicators haven’t made a bullish crossover just yet, but they look like they could soon.
The RSI indicator points to a transition from a downtrend to an uptrend -- in cases where BZUN's RSI indicator exited the oversold zone, 9 of 10 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued uptrend are 90%.
Yet another positive sign for Baozun is the fact that the lower Bollinger Band was broken. In 24 of 30 cases where the stock’s price broke its lower Bollinger Band, it rose further in the following month. The odds of a continued upward trend are 80%.
On the fundamental side we see that the Tickeron SMR rating for this company is 32, indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
The company saw sales increase by 42% in the second quarter and it has averaged sales growth of 26% over the last three years. Analysts expect sales to grow by 30.9% for 2019 as a whole. The return on equity is at 17.2% while the profit margin is a little below average at 7.7%.
Earnings have grown by an average of 79% per year over the last three years and they were up by 50% in the second quarter. Analysts’ estimates are suggesting earnings growth of 43% for 2019.
The sentiment toward Baozun is mixed with analysts being rather bullish on the stock while short sellers are extremely bearish on the stock. There are 12 analysts following the stock with 10 “buy” ratings and two “hold” ratings. That puts the buy percentage at 83.3% and that is above the range of 65% to 75%.
The short interest ratio is a whopping 10.64 and that is the highest reading for the ratio this year. It is also one of the highest readings I have seen in recent months.
Given the strong fundamentals and the huge short interest ratio, those two scenarios alone make me think it’s time for Baozun to bounce. When you add the pattern where the stock has gained over 50% after the last two earnings reports and it has done it in less than two months—that is icing on the cake to me.
BZUN in upward trend: price rose above 50-day moving average on April 23, 2024
BZUN moved above its 50-day moving average on April 23, 2024 date and that indicates a change from a downward trend to an upward trend. In of 45 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on April 22, 2024. You may want to consider a long position or call options on BZUN as a result. In of 94 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for BZUN just turned positive on April 22, 2024. Looking at past instances where BZUN's MACD turned positive, the stock continued to rise in of 47 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where BZUN advanced for three days, in of 266 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Stochastic Oscillator has been in the overbought zone for 1 day. Expect a price pull-back in the near future.
The 10-day moving average for BZUN crossed bearishly below the 50-day moving average on April 02, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 11 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
BZUN broke above its upper Bollinger Band on April 24, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for BZUN entered a downward trend on April 12, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. BZUN’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.278) is normal, around the industry mean (3.732). P/E Ratio (0.000) is within average values for comparable stocks, (59.569). Projected Growth (PEG Ratio) (0.000) is also within normal values, averaging (1.921). Dividend Yield (0.000) settles around the average of (0.026) among similar stocks. P/S Ratio (0.127) is also within normal values, averaging (10.201).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. BZUN’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 92, placing this stock worse than average.
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a provider of e-commerce solutions
Industry InternetRetail