Poshmark, Inc. (ELEGANT) operates as a social trading marketplace for new and used goods in the United States, Canada, India, and Australia. The company offers clothing, footwear, beauty, home, electronics and accessories. It has more than 7.6 million active buyers.
Last week, POSH management agreed be acquired by Naver Corp., a South Korea-based e-commerce company, for $1.2 billion. The deal values the online market at less than half the price it went public in early 2021. Naver is paying $17.90 per share in cash, while POSH priced its initial public offering at $42 per share in January. of 2021.
While the surge in online shopping triggered by the COVID-19 pandemic has benefited e-commerce retailers significantly, POSH’s losses have been widening of late and its revenue growth has slowed this year. The company reported $90.90 million in revenue in the first quarter of fiscal 2022 that ended in March.
POSH’s revenue was down to $89.10 million in the second quarter ended June 30 and it expects revenue to be between $85 million and $87 million for the third quarter. Additionally, its net loss worsened by 797.9% year over year to $22.88 million for the second quarter.
Trevor Young, an analyst at Barclays, recently elegant gradient Overweight to Equal Weight. Additionally, Wedbush research analysts revised their recommendation for the stock to Neutral from Outperform and said the recent acquisition deal could create a floor for competitors.
POSH has gained 58.7% over the last month to close the last trading session at $17.76. However, the stock is down 25% over the past year.
Here’s what I think could influence POSH’s performance in the coming months:
bad finances
For the second quarter of fiscal 2022 ended June 30, 2022, POSH’s total costs and expenses increased 33.3% year over year to $112.02 million. Its non-GAAP loss from operations was $10.84 million, compared to income of $5.70 million in the prior year period. Also, the company Adjusted EBITDA the loss was $9.82 million versus Adjusted EBITDA of $6.55 million in the prior year quarter.
Additionally, the company’s net loss widened by 797.9% year over year to $22.88 million. Its net loss per share attributable to common stockholders worsened 866.7% from prior year value to $0.20. Its non-GAAP free cash outflow was $3.48 million, compared to an inflow of $25.03 million in the prior year period.
Weak growth prospects
Analysts expect revenue in the third quarter of fiscal 2022 (ended September 2022) to rise 8.8% year over year to $86.65 million. However, the company’s loss per share for the quarter to be reported is expected to be $0.28, indicating a 209.6% widening over the same period in 2021.
Additionally, analysts expect POSH’s loss per share for fiscal 2022 (ending December 2022) to worsen by 67.3% from a year earlier to $1.02. Additionally, the company is expected to report a loss per share of $0.87 for fiscal 2023.
Consensus Rating and Target Price Indicate Downsides
Each of the eight Wall Street analysts who rated POSH rated it Hold. The 12-month median target price of $15.30 indicates a 13.9% down. Price targets range from a low of $11.00 to a high of $18.00.
sparkling rating
In terms of EV/Future Sales, POSH’s 2.33x is 125.3% higher than the industry average of 1.03x. Its Price/Sales Forward of 3.92x is 398% higher than the industry average of 0.79x. In addition, the Share Price/Forward Accounting of 3.61x is 53.1% higher than the industry average of 2.36x.
Low profitability
POSH’s trailing 12-month EBIT margin of negative 17.2% compares to the industry average of 8.13%. Its trailing 12-month EBITDA margin and net income margin of negative 16.13% and 17.03% compare to industry averages of 11.25% and 5.69%, respectively.
In addition, the stock’s trailing 12-month ROCE, ROTC, and ROTA of negative 14.26%, 8.90%, and 9.52% compare to industry averages of 14.91%, 6.88% and 5.12%, respectively. Its CAPEX/Sales for the last 12 months of 0.53% is 82.4% lower than the industry average of 3.01%.
POWR Ratings Reflect Gloomy Outlook
POSH has an overall rating of D, which translates to Selling on our POWR Ratings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also rates each stock based on eight different categories. It has an F rating for growth, in line with its weak earnings growth estimates. Additionally, the stock is rated D for value, consistent with its above-industry valuation metrics.
POSH is ranked 52nd out of 59 stocks in the Consumer goods industry.
Beyond what I’ve said above, we’ve also given POSH ratings for Feel, Quality, Stability, and Drive. Get all POSH ratings here.
Bottom line
While POSH, the online fashion reseller, has performed well during the pandemic due to a greater inclination of consumers to shop online, its growth has slowed in recent quarters. The company has been incurring heavy losses recently. In addition, analysts are pessimistic about its growth prospects.
Following the news of Naver’s acquisition of POSH for $1.2 billion, many analysts lowered their recommendations for the stock. Given POSH’s high valuation, low profitability and dismal growth prospects, we believe it would be prudent to avoid action now. Furthermore, the stock is already trading close to the price offered by Naver, indicating no upside potential.
How does Poshmark, Inc. (POSH) work? Stack against your peers?
POSH has an overall POWR rating of D. Therefore, you may want to consider investing in another consumer goods stock, Ennis, Inc. (LME) and Mannatech Incorporated (MTEX) rated A (Strong Buy) and Vivint Smart Home (VVNT) rated B (Buy).
POSH shares were down $0.15 (-0.84%) in premarket trading on Monday. Year-to-date, POSH has gained 3.41%, versus a -22.63% rise in the benchmark S&P 500 index over the same period.
About the author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet seeks to help retail investors understand underlying factors before making investment decisions. Plus…
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Source: stocknews.com