Buy This Online Retailer Before Tomorrow's Close

At first glance, it may seem like second-quarter earnings season is just about over. Over 450 companies in the S&P 500 have reported earnings already, with 8.4% average earnings growth and4.3% sales growth. That’s not bad considering that analysts were calling for 4.9% earnings growth and 2.8% sales growth prior to the start of earnings season.

However, we still have a few stocks—mostly from the small- and mid-cap arena—that have yet to report earnings. In fact, one of my favorite retail stocks is scheduled to report tomorrow evening. Judging from the overwhelmingly positive data on this company, I expect this to be an excellent report. So if you’re looking for another chance to capitalize on this historic earnings season, this is it:

Vipshop (VIPS) is a leading online discount retailer in China. The company targets China’s brand-oriented middle class, working with thousands of well-known brands to host online flash sales at deep discounts to regular prices.

While here in the U.S. we have off-price retailers like T.J. Maxx (TJX) and Ross Stores (ROST) as well as large outlet malls belonging to Tanger Factory Outlets (SKT) and Simon Property Group (SPG)’s Premium Outlets, China is significantly underdeveloped in terms of physical brick-and-mortar discount retailers and outlets, and consumers are going directly online for discounts on popular brands.

Enter the opportunity in Vipshop. Vipshop offers a selection of branded discount products, including apparel for women, men and children, fashion goods, cosmetics, home goods and lifestyle products, footwear, sporting goods, luxury goods and gifts.

(In the interest of full disclosure, VIPS is a stock that I have in not one, but three of my newsletters right now. In my two most conservative newsletters, Blue Chip Growth and the Navellier Family Trust, the position is up 56% and 46% respectively. This is over the span of just five months. In my Emerging Growth letter, I took a leap of faith on this company back in July 2013. The result has been a stunning 607% gain.)

Before I go any further, I’m addressing the elephant in the room: Why recommend VIPS now, when it has rallied so strongly in recent months? Well, that’s because there is plenty of upside on the horizon.

Take the company’s second-quarter earnings report, which is due out after the close tomorrow, August 13. The consensus estimate is calling for $0.64 earnings per share on $791.55 million in revenue. Compared with Q2 2013, this translates to a whopping 125.3% sales increase and 220% earnings growth.

And if history repeats itself, Vipshop will surpass even these lofty expectations. The online retailer has posted double-digit earnings surprises for the past three quarters running, and the latest round of analyst earnings revisions is looking very positive.

Looking farther ahead, Vipshop is expected to post triple-digit top- and bottom-line growth through the end of FY 2014 and double-digit sales and earnings growth through the end of FY 2015. With such stunning earnings projections for the foreseeable future, Vipshop has graduated from a near-term trade to a solid long-term growth story.

This Moderately Aggressive stock (as rated by Portfolio Grader) is an A-rated Strong Buy.


Louis Navellier

Louis Navellier

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