When we think of e-retailer giants, eBay Inc. (NASDAQ: EBAY), Amazon.com, Inc. (NASDAQ: AMZN) and Barnes & Noble, Inc. (NYSE: BKS) are some of a few that come to mind. However there is an underdog that is new on the market and is slowly eating into the business of established players. Lightinthebox Holding Co Ltd-ADR (NYSE: LITB) was founded in 2007 and has its headquarters in Beijing, in The People's Republic of China. Starting its e-commerce store with a small selection of mostly Chinese manufactured goods, Lightinthebox Holding Co.'s online store has grown to include a wide assortment of goods that include: designer dresses, electronics, lighting fixtures, and home design products. Despite its great potential there are some risks that all investors need to be clearly aware of.
Lightinthebox Holding Co Ltd-ADR made its debut on the New York Stock exchange in June of this year, its shares trading at $9.15. Since then the stock has been on a bumpy path, with shares reaching $22 in August before incurring significant losses thereafter. Currently, the company's shares are trading at an all-time low of $7.49. Partly to blame for the poor performance of the company's shares since the IPO are weaker than expected earnings results. The company posted revenue for the third quarter of $68.1 million which was below analysts' expectations of $69.9 million. Sales for the last quarter of this year are also expected to be below consensus estimate. Weak consumer spending in Europe and North America are partly to blame. On the earnings side, the company posted a loss of $0.04 per share against an earnings estimate $0.02 a share. Increasing labour costs in China are putting pressure on the company's profit margins.
The consensus among research firms is too stay away from this stock for now as it is not yet possible to accurately determine the future path of the company's shares. Having just listed on the stock exchange, it is likely that there is currently a lot of market correction going on. Current SEC rules allow companies to fidget a bit with the numbers before an IPO in order to increase subscription of their shares. However, this can only be done once and it is a matter of time before the true picture of the company is known. Lightinthebox Holding Co Ltd-ADR has the difficult task of regaining investor trust after these series of disappointments, but that is not the end of the game.
Sales continue to increase at an average of 30 percent per quarter. Compare that to Amazon.com, Inc. at 22 percent and eBay Inc. at 14 percent. Hence, it is too early to discount this stock yet. The current share price greatly undervalues the company in a number of ways. Investors are focused on earnings and ignore other growth metrics. As a Chinese stock, the company is also viewed in light of other Chinese companies that have been underperforming and where there have been allegations of insufficient disclosure of company status. In my opinion, Lightinthebox Holding Co Ltd-ADR is in the same league as other emerging tech giants and it would be unwise to ignore this opportunity.