Baozun Stock Forecast: When it comes to the stock market, many investors are attracted to the technology stocks with the biggest market capitalization: industry titans like Amazon, Google, Facebook, and Apple.
However, while these companies are dominant throughout the United States and much of the Western world, the “big tech” landscape looks very different in countries such as China.
In recent years, a number of massive Chinese technology companies have sprung up within the country, filling similar roles as the tech players in the U.S. For example, Baidu has often been called the “Google of China” thanks to its dominance of the Chinese search engine market.
Meanwhile, Chinese e-commerce company Alibaba has been equated with U.S. corporations such as Amazon and eBay.
Baozun [NASDAQ: BZUN] is a Chinese tech company that has attracted its own nickname of the “Shopify of China.” While Baozun is still relatively unknown to U.S. investors, a growing number of market analysts are noticing the stock’s growth potential. In this article, we’ll discuss the pros and cons of buying Baozun stock.
What Does Baozun Do?
Baozun [NASDAQ: BZUN] is a Chinese company that supplies an online platform to help brands develop e-commerce solutions for their retail businesses. This functionality has caused many observers to compare Baozun with other e-commerce platforms such as Shopify.
More specifically, Baozun provides e-commerce products such as online storefronts, marketing campaigns, and operations and fulfillment services. The company works with customers ranging from small businesses to major brands such as Microsoft, Nike, and Philips, helping them get set up in the Chinese market with functions such as IT, marketing, logistics, and customer service.
This last fact allows Baozun to distinguish itself from Shopify, which only provides an SaaS (software as a service) e-commerce platform. In addition to its e-commerce platform, Baozun offers professional, end-to-end e-commerce services for established companies looking to expand into China.
Founded in 2007, Baozun [NASDAQ: BZUN] is currently headquartered in Shanghai, China and employs more than 5,000 people. The co-founder and current CEO of Baozun is Wenbin (Vincent) Qiu. Baozun’s major competitors include other Chinese e-commerce partners such as Web2Asia and 2 Open.
Is Baozun a Buy?
China is projected to become the world’s largest retail market in 2019 and still expanding fast, which makes Baozun a superficially attractive investment. The company currently has a market capitalization of $2.9 billion, which means that it’s not a major power player in the Chinese market but still has plenty of room to grow.
One piece of good news is that Baozun doesn’t face a great deal of competition in its niche – it’s by far the largest company in the Chinese e-commerce space. Alibaba, which was once a potential rival for Baozun, has now joined forces with the company for its Tmall and Taobao online marketplaces.
Since its IPO in 2015, Baozun stock has been rising strongly and steadily: shares now trade for more than 3 times their IPO price. In Q2 2019, Baozun revenue rose by 40 percent year over year to reach 1.29 billion yuan ($192 million USD), while operating income surged by 61 percent. The company is already profitable, and should be in a good position to succeed in the coming years as the purchasing power of the Chinese middle class continues to grow.
What are the Risks of Buying Baozun?
Like other companies that bridge the gap between Western and Chinese markets, Baozun has a lot to lose in the event of a U.S.-China trade war or a global economic recession.
U.S. tariffs on Chinese products announced by the Trump administration won’t have a direct impact on e-commerce businesses like Baozun, but they will cause a ripple effect lowering demand for U.S. products in the Chinese market, which could seriously impact Baozun’s business model.
Shares of Baozun [NASDAQ: BZUN] have fallen back to earth since reaching a peak above $60 in June 2018, although the stock has been mounting a strong recovery in 2019 thus far.
Nevertheless, there’s the chance that the stock will continue to cool off due to China’s slowing economic growth. In July, China announced a Q2 2019 GDP growth rate of 6.2 percent, which was within the government’s target range but still the lowest figure since March 1992.
Baozun Stock Forecast: Summary
While Baozun [NASDAQ: BZUN] isn’t the right choice for every investor, it’s an intriguing possibility for those who want to get their feet wet and take some risks.
Fears of an economic slowdown and a lengthy U.S.-China trade war might impact the stock’s growth in the short term, but the foundations of the company look solid in the long run.
China’s middle class will continue to expand regardless of any blips and bumps, and Baozun is well-positioned to take advantage of the country’s increasing consumer demand.
Buying Chinese stocks comes with a few idiosyncrasies, and it’s worthwhile for investors to learn as much as they can about the technology landscape in China before they buy shares of Baozun. Still, if you’re willing to buy and hold a long-term position in Baozun stock, you just might reap the rewards down the line.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.