High-level 40% amplitude earthquake split, the interstellar fashion (STFS.US) with a cumulative increase of 535% in three months is about to start adjustments?

In 2024, a total of 62 Chinese companies completed their listing on the US stock market through an initial public offering (IPO). Among these 62 companies, the most impressive performance in terms of stock price comes from Xiamen-based content marketing solution provider Star Fashion (STFS.US). It was observed that Star Fashion successfully listed on the Nasdaq on October 11, 2024, with an IPO price of $4 per share. Its stock price performance after listing can be described as "low open, high close." On the first day of trading, Star Fashion's stock price dropped by nearly 30% intraday, narrowing to 18.5% by the closing bell. Afterwards, the stock price of Star Fashion began to stabilize and started to rise rapidly a month later. By January 15, Star Fashion's stock price had risen to a high of $17.91 per share. This means that in nearly 3 months, Star Fashion's stock price had surged by a maximum of 535%. The highest price of $17.91 represented an increase of 347.75% from the IPO price, surpassing other Chinese companies listed in 2024. However, on January 15, when Star Fashion's stock price reached a new high, it also experienced significant fluctuations. The stock price surged as high as 23.52% in early trading, then dropped to a low of $11.8, a decrease of 18.62%. Although the stock price rebounded significantly towards the end of the day, closing with a 2% decrease, the stock price fluctuated by over 40% throughout the day, with a trading volume reaching $11.1 million, indicating significant trading activity. Stock price increase accelerates in three stages Star Fashion's journey to the US market was not smooth. In June 2024, Star Fashion filed for an IPO with the SEC, planning to issue 3 million common shares at a price of $4 to $5 per share. However, due to the lukewarm new stock market at the time, Star Fashion did not attract much funding. Just over a month later, the number of shares to be issued was reduced to 2.6 million shares, a decrease of about 13.33%, reducing the supply of shares. In the days leading up to Star Fashion's listing, Chinese A-shares and Hong Kong stocks continued to rise, leading to impressive performances in Chinese concept stocks in the US stock market. However, Star Fashion was still not well received by the market, as its stock price plunged on its first day of trading, opening below the IPO price. Despite some resistance during the day, the stock price accelerated its decline towards the end of the day, dropping to a low of $2.82, a decline of 29.5%, and closing with an 18.5% drop. Over the next month, Star Fashion's stock price continued to fluctuate around the $4 IPO price. November 13 was a key day when Star Fashions both long and short sides fought intensely. The stock price surged over 14% in early trading, then fell by nearly 20 points, turning negative by over 5%. It then quickly rebounded and turned positive, closing with a 5.71% increase, with a trading volume of 2.1 million, 21 times higher than the previous day. After the victory of the long side on November 13, Star Fashions stock price stabilized at $4 with high volume, returning to the IPO price. From that day on, Star Fashion's stock price increase can be divided into three distinct stages. Stage one was from November 13 to December 16, with a slight and steady increase. Stage two began to accelerate from December 17. Stage three started in January, showing full firepower in the upward trend, with a maximum increase of about 153% in the 9 trading days from January 2 to January 15. On January 15, the trading volume reached $11.1 million, not the highest in history, but significantly higher than the previous days with volumes of 2.93 million, 2.29 million, and 4.35 million. Combined with the fundamental analysis of Star Fashion, a deeper understanding can be obtained regarding whether the stock price has peaked. Impressive performance, high valuation may have deviated from fundamentals Analyzing the stock price trend mentioned above, we can see that November 13 was a key turning point for Star Fashion's stock price. This was because on that day, Star Fashion released its annual report, disclosing the financial performance for the 2024 fiscal year (12 months ending June 30). As a professional content marketing and precision marketing service provider, Star Fashion helps clients enhance the effectiveness of marketing activities and brand value through project planning, design, operation, and execution. Currently, Star Fashion primarily provides three main services to clients: marketing activity planning and execution, offline advertising services, and online precision marketing services. The marketing activity planning and execution service involves comprehensive marketing planning and implementation for large events such as marathons, sports events, and music festivals to achieve the desired marketing results for clients. This is the company's main business, with this segment accounting for 54.9% and 80.5% of revenue in the 2022 and 2023 fiscal years, respectively. In the 2023 fiscal year, after organizing two large marathon marketing events in Kunming and Guizhou, Star Fashion acquired 10 new clients, leading to a significant revenue growth of 186.1% to 55.6 million RMB in this segment and driving the total revenue for the year to increase by 95.2% to 69.0394 million RMB. With the combined effect of revenue growth, a 3 percentage point increase in gross profit margin, and operational efficiency improvement, Star Fashion achieved a net profit of 7.818 million RMB in the 2023 fiscal year, a year-on-year increase of 214.35%. Clearly, Star Fashion saw a significant revenue and net profit growth in the 2023 fiscal year, which was directly related to the strong recovery of large event activities such as marathons, sports events, and concerts after the impact of the pandemic. However, despite the high performance in the 2023 fiscal year, the risk of highly concentrated clients for Star Fashion has not been eliminated. In its prospectus, Star Fashion stated that it is highly dependent on core clients, with the top three core clients contributing approximately 76% of revenue in the 2022 fiscal year, and the top four clients contributing 61% of revenue in the 2023 fiscal year. Although the concentration has decreased, it remains at a relatively high level.This is a potential threat to the sustainability of performance.Entering the 2024 fiscal year, Intergalactic Fashion's revenue increased by 57.6% to approximately 109 million RMB, with a net profit of 11.2095 million RMB for the period, a year-on-year increase of 43.39%, showing continued high-speed growth. The sustained rapid development can be attributed to the steady growth of market marketing activities planning and execution services, as well as the explosive growth of online precision marketing business. Specifically, during the reporting period, Intergalactic Fashion executed 16 activities for 21 clients, compared to 8 activities for 12 clients in the 2023 fiscal year, resulting in a 30.5% increase in revenue for market marketing activities planning and execution services to 72.6 million RMB in the 2024 fiscal year. At the same time, Intergalactic Fashion successfully launched two precision marketing projects, attracting 20 clients and leading to a 417.3% surge in revenue for online precision marketing services to 31.6 million RMB during the reporting period. Moreover, as the performance continues to grow, Intergalactic Fashion's customer concentration further significantly decreased. Data shows that in the 2024 fiscal year, revenue from the top four clients accounted for 16.1%, 10.4%, 3.2%, and 3.9% respectively, totaling 33.6%, a substantial decrease from 61% in the 2023 fiscal year, indicating the effectiveness of Intergalactic Fashion's diversified customer strategy. With the impressive financial report showing continuous rapid growth in performance and decreasing customer concentration, Intergalactic Fashion started its upward trend on November 13th. However, after the stock price continued to rise for two months, it is uncertain whether Intergalactic Fashion's stock price can continue to move forward. Looking at the valuation aspect, Intergalactic Fashion's current valuation is relatively high. As of the closing on January 15th, Intergalactic Fashion's market capitalization was 170 million USD, while its net profit for the 2024 fiscal year was 11.2095 million RMB. With an optimistic estimate of a 50% increase in net profit for the 2025 fiscal year to reach 16.8 million RMB, the current market value corresponds to a PE valuation of 74 times for Intergalactic Fashion's 2025 fiscal year. In terms of PB valuation, as of June 30, 2024, Intergalactic Fashion's total assets were approximately 60 million RMB, total liabilities were about 37.4512 million RMB, and net assets were about 23 million RMB. The current market value corresponds to a static PB valuation of 54 times. In conclusion, Intergalactic Fashion's outstanding performance has laid a solid foundation for the continuous rise in its stock price. However, after a cumulative 535% increase in the stock price over three months, the valuation of Intergalactic Fashion has been pushed to a high level. Whether the market will support such a high valuation remains to be seen, and investors may have to wait and see.