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Why Baozun Stock Lost 17.2% in December

Keith Noonan, The Motley Fool

What happened

Shares of Baozun (NASDAQ: BZUN) dipped 17.2% in December, according to data from S&P Global Market Intelligence. The Chinese e-commerce company saw another month of steep stock declines as slowing economic growth and ongoing trade tensions between China and the U.S. weighed on its outlook.

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Baozun provides major Western brands with customizable online retail portals, customer management services, and order warehousing and fulfillment -- all-in-one solutions for companies looking to quickly enter the Chinese market and benefit from its rapid e-commerce growth. The stock hit a lifetime high of roughly $67 in mid-2018, but sell-offs for the broader market and concerns about the company's growth outlook caused shares to undergo a dramatic slide in the second half of the year. 

Boxes on conveyor belts.

Image source: Getty Images.

So what

December marked Baozun's third consecutive month of double-digit stock declines. The company's share price fell roughly 11% in November following news that the company's sales during Singles Day (the Chinese retail equivalent of Black Friday) had grown at a much slower rate than in the previous year. The stock also recorded an 18% sell-off in October, due to investor concerns about negative impact from the country's trade dispute with the U.S.

Even with shares trading down more than 50% from the lifetime high they hit in 2018, Baozun's valuation has still more than tripled since its initial public offering in 2015. There wasn't any big company-specific news behind its December stock slide, but less favorable economic data and marketwide sell-offs appear to have once again prompted investors to consider whether the company's valuation had gotten ahead of its growth prospects.

Now what

Baozun stock has posted gains in January amid rebounds for the Chinese tech sector and the broader market. The e-commerce specialist's shares trade up roughly 8.9% in the month so far.

^SPX Chart

^SPX data by YCharts

Uncertainty stemming from ongoing trade tensions between China and the U.S. and signs of slowing consumer discretionary spending in the the Middle Kingdom suggest that Baozun shares could continue to see volatile swings in the near term. The stock probably isn't a great fit for every investor, but those looking for ways to benefit from the growth of Western brands and online retail in China should have the stock on their watch list. Shares now trade at roughly 21 times this year's expected earnings, a potentially attractive level when viewed in the context of the company's recent growth and long-term opportunity to continue expanding with the growth of online retail in China. 

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Keith Noonan owns shares of Baozun. The Motley Fool owns shares of and recommends Baozun. The Motley Fool has a disclosure policy.