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Why the Redbubble share price is up ~30% in a month (60 second wrap)

We look at the highlights from Redbubble’s first quarter (FY21) trading update.

The value of ‘Weirdly Meaningful Gifts’

Though the coronavirus pandemic has wreaked havoc on a number of industries and markets, including bricks & mortar retail, the global oil complex, and air travel – it has also created a number of opportunities and key benefactors – chief among them: e-commerce.

Unsurprisingly, large-cap e-commerce players such as Amazon, Sea, Etsy and MercadoLibre have all rallied hard off their March lows – first on the assumption of increased sales and then on their eventual realisation. Underscoring the magnitude of this shift, Amazon reported a staggering ~40% jump in revenues during the prior quarter – from US$63.4bn (Q319) in revenues to US$88.9bn (Q320).

Like those large-caps, ASX-listed Redbubble (ASX: RBL), which provides users access to an art-focused marketplace comprised of ‘awesome products’ and ‘weirdly meaningful gifts’, has seen both its share price and fundamentals drastically improve over the last ten months. YTD the stock is up over 400%, as investors seemingly clamour to trade anything with an ‘e-commerce’ angle attached to it. In the short-term, RBL has continued to run higher over the last month – with investors likely impressed by the company’s recently released ‘triple digit’ Q1 report.

Why the Redbubble share price has continued to rally: 60 second wrap

Despite trading positively before its latest trading update – bullishness around the stock looks to have ratcheted up another level following the Q1 report RBL released last Thursday – with the stock trading as high as $6.020 per share (+25%) during that session. Mind you, RBL finished out last Thursday’s session at $5.350 per share, somewhat off that intraday peak.

Looking at the key figures of this release, during Q1 FY21 and a on YoY basis, Redbubble reported:

  • Marketplace revenues of $147 million, up 116%
  • Gross profits of $64.5 million, up 149%
  • Earnings (EBIT) of $22.1 million
  • A cash balance at the quarter's close of $85.4 million

Speaking to the next steps for RBL, the company’s CEO, Martin Hosking said:

‘The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth.'

What’s your take on RBL’s ‘triple digit’ release?

Are you bullish or bearish on the stock going forward? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Redbubble using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘RBL’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

How did one top investment bank respond?

Analysts from Goldman described RBL’s Q1 as a beat, with the investment bank particularly impressed by the company’s strong gross margins. More broadly, Goldman analysts retained their Buy rating on the stock, citing a growing total addressable market (TAM), the potential to see improved repeat usage from RBL’s user-base; and 'further operating leverage as we expect RBL to manage cost growth well below revenue growth,' as three key drivers behind the bullish rating.

Goldman has a $6.25 PT on RBL.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.

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