Is the Redbubble Ltd (ASX: RBL) share price a buy after soaring 30% this week?

Could the Redbubble Ltd (ASX: RBL) share price be a buy after an outstanding first quarter trading update?

| More on:
Speech bubble containing question mark against red background representing question of whether red bubble share price will burst

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Redbubble Ltd (ASX: RBL) share price has delivered Afterpay Ltd (ASX: APT) like returns after soaring more than 1000% from March trough to today's peak. After an outstanding FY21 first quarter trading update, is it too late to buy the Redbubble share price? 

Record first quarter FY21

Redbubble is in a prime position to leverage the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms. It delivered an outstanding FY21 first quarter trading update with Q1 revenue increasing 114% to $175.8 million and an EBIT of $22.1 million compared to a $1.5 million loss in Q1 FY20. 

The company's products are diverse across T-shirts, accessories, stationery and stickers, artwork, homewares and other apparels. T-shirts and accessories contributed to 56% of its revenues in Q1. The accessories segment experienced more than 500% revenue growth in Q1 year on year, likely to be driven by the increased purchases of face masks.  

North America contributes to more than 70% of the company's revenue. Other regions such as Europe, the UK and ANZ contributed 12%, 10% and 6% respectively. All major regions delivered triple digit growth excluding the EU.

Moving forward, the company is focused on 4 key initiatives to generate ongoing profitable growth. This includes: 

  • Artist acquisition, activation and retention 
  • User acquisition and transaction optimisation 
  • Customer understanding, loyalty and brand building 
  • Further physical product and fulfilment network expansion  

Is the Redbubble share price a buy?

It's a tough call for the Redbubble share price as it soared more than 1000% since its March lows without taking any breathers. The increasing number of COVID-19 cases in major economies around the world and the upcoming US election could increase the general market volatility in the near term. This could make Redbubble susceptible to sharp sell offs and profit-taking. 

Notwithstanding the risks to the broader market, Redbubble delivered an outstanding Q1 FY21 update and paints a roadmap to profitability. The company maintains a strong balance sheet with $58 million in cash as at 30 June 2020. It is also trades at a cheaper revenue multiple than US-listed competitor, Etsy. 

Foolish Takeaway

I would prefer the Redbubble share price to take a breather and healthy pullback before considering it a buy. However, given the strong Q1 FY21 update, it appears that the share price is likely to stay near record high levels or continue to push higher. If you're a believer of the Redbubble business, I would pay closer attention to its share price for any buying opportunities. 

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Best ASX Shares

Three travellers laughing and smiling outside an airport
⏸️ Best ASX Shares

If you'd invested $2,000 in Webjet (ASX:WEB) shares 10 years ago, here's what it would be worth now

The travel expert has proved a winner for long-haul investors...

Read more »

illustration of three houses with one under a magnifying glass signifying mcgrath share price on watch
⏸️ Best ASX Shares

The 5 best ASX real estate shares of the 2021 financial year unmasked

Office space, industrial storage, retail malls and residential. These companies cover them all.

Read more »

asx share price increase represented by golden dollar sign rocketing out from white domes of lithium
Energy Shares

5 best ASX energy shares of the 2021 financial year revealed

As the world emerged from initial COVID lockdowns, the demand for energy soared.

Read more »

best asx 200 shares of financial year 2021 represented by 2021 formed with gold piggy bank
⏸️ Best ASX Shares

Meet the best performing ASX 200 shares of FY21. Are yours on the list?

These companies have been crowned the best of the best in FY21...

Read more »

retail asx share price represented by shopping trolley full of cash
⏸️ Best ASX Shares

How I'd build a 'best stocks to buy now' list

Focusing on the quality and prices of companies from a diverse range of sectors could make it easier to build…

Read more »

asx share price on watch represented by investor looking through magnifying glass
⏸️ Best ASX Shares

How I'd aim to find top shares to buy in March 2021

Comparing companies with their peers and considering how they might change in future could allow an investor to find the…

Read more »

Brest ASX shares represented by piggy bank surrounded by autumn leaves
⏸️ Best ASX Shares

Top ASX shares to buy in March 2021

Our Foolish contributors have compiled a list of some of the ASX shares experts are saying to Buy in March.…

Read more »

rising asx share price represented by man with arms raised against blackboard featuring images of dollar notes
⏸️ Best ASX Shares

Why the Wesfarmers (ASX:WES) share price has soared 24% in a year

The Wesfarmers Ltd (ASX:WES) share price has been a solid performer over the past year. Here's why this ASX blue…

Read more »