CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Is Baby Bunting worth $3.60 per share?

We examine the company’s recent preliminary FY20 results update as well as Citi’s Buy thesis on the stock.

The Baby Bunting (BBN) share price rallied over 11% on Tuesday, after the company released its preliminary, unaudited FY20 results to the market.

BBN last traded at $3.55 per share, some 50% higher than it did a mere three months ago.

Unaudited results at a glance

Looking at the highlights of the company’s ‘FY20 Financial Results Update’, on the top-line, the company said that it expected its full-year revenue to come in at around $405 million, representing a year-over-year increase of 12%. In that same period, online sales grew an impressive 39% and now account for 14.5% of the company’s total sales.

On the bottom-line, BBN expects to report pro forma earnings (EBITDA) of between $33-34 million, representing a growth rate of between 22-25%. By comparison, pro forma profits (NPAT) are expected to come in at between $18.5-19.5 million, representing a growth rate of between 29-35%.

Management noted that these results remain subject to audit and are yet to be finalised.

Regardless of that, Baby Bunting's Chief Executive Officer Matt Spencer rightfully described these as very positive results, given the current economic climate, saying: 'We have seen the business continue to grow in FY20 and I am confident that growth will continue in FY21.'

Mr Spencer added that BBN has continued to grow its market share over the last year, as well as achieve 'positive comparable store sales growth, gross margin improvement and retail cost leverage while also maintaining prudent working capital management resulting in Zero debt and $13 million in the bank.'

Baby Bunting is set to report its audited FY20 financial results on Friday, 14 August.

Citi analysts remain bullish on Baby Bunting share price outlook

In response to Baby Bunting's preliminary full-year update, Citi analysts raised their FY20 sales estimates by 1% – bringing them in line with the company’s latest guidance.

Overall, and in a recent note, analysts from Citi – who have been bullish on the stock for some time now – said:

‘We rate Baby Bunting Buy as it is well placed to drive medium term growth given the less discretionary product category, new growth opportunities in shopping centres and related baby services, and limited competition. Store rollout target upgrade could represent a short term share price catalyst.’

Citi currently has a price target of $3.60 per share on BBN, implying a sliver of upside from current price levels.

Looking forward, the investment bank is currently forecasting that the company will experience robust top and bottom-line growth upto FY22. Specifically, Citi expects BBN's revenue to grow from an expected $405.1 million in FY20 to $466.0 million in FY22; while earnings (EBIT) are expected to grow from $32.7 million to $47.0 million, between FY20 to FY22.

Elsewhere, some of the key risks identified by Citi include increased competition, particularly in the online space; the poor rollout of new stores; weakness in consumer trends; and adverse currency movements.

Want to take a position in Baby Bunting, long or short?

Create an IG trading account or log in to your existing account to get started now.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.