Summit's Guo Sees Buying Opportunity On Vipshop Sell-Off

In a report published Wednesday, WR Hambrecht analyst Henry Guo maintained a Buy rating on Vipshop Holdings Ltd - ADR VIPS, while reducing the price target from $35 to $31.

Vipshop Holdings reported robust 2Q15 results, with both top and bottom line beating the Street expectations. The company's gross and operating margins also continued to improve, despite investments in technology and branding.

Guo expects that the margin pressures arising from investments to be offset by increased leverage. The company's mobile segment gained traction and contributed 76 percent of the GMV in 2Q15, up from 72 percent in 1Q15 and 66 percent in 4Q14.

"We believe the mobile strength should further help top line growth, given mobile transaction's high frequency," Guo added.

Concerns related to the macro environment and deceleration in top line growth led to a negative market reaction to Vipshop Holdings' results, the WR Hambrecht report noted.

According to Guo, "Compared to other B2C players in the space, we believe Vipshop's discount merchandise model is less cyclical, as it provides a platform for retailers, brands, and manufacturers to clear their off - season and unsold inventory."

Vipshop Holdings' long-term growth prospects are expected to be driven by strong business fundamentals, category expansion, cross border model and increasing coverage of in-season merchandise.

"With dominant position in the market, healthy top-line growth trajectory, and high visibility to profitability improvement, we consider VIPS a key holding to get exposure to China's B2C eCommerce growth in the longer term," the WR Hambrecht report added.