Temple & Webster (ASX:TPW) share price barnstorms back with 11% rise

The Temple & Webster share price fell by 14% over the past four days, only to barnstorm back by more than 11% today at time of writing.

| More on:
surging asx ecommerce share price represented by woman jumping off sofa in excitement

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 Temple & Webster Group Ltd (ASX: TPW) share price has come storming back today after seeing falls of 14.2% over the previous 4 days' trading. The company had been part of a recent sell off across e-commerce retailers more broadly. Other online shopping companies such as Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL), and Marley Spoon AG (ASX: MMM) had also seen market losses. However, at the time of writing, the Temple & Webster share price has surged by 11.51% to $10.95. 

What was troubling the Temple & Webster share price?

On Friday 23 October, fund managers decried the market valuations of many of the online shopping and delivery companies. Chris Tynan, an investment analyst at DNR Capital commented:

The mania over e-commerce feels similar to infant formula and vitamins in 2015… Consumer behaviour has been squeezed online and some of it will stick. If you were ever able to float an internet consumer business then it's now.

Without commenting on individual stocks, there will be some great businesses that emerge from the hysteria, but many will struggle in a normalised consumer environment.

As noted, consumers have been squeezed into the online trading space and may not stay there once the economy normalises. However, investors have been piling back into Temple & Webster shares and other e-commerce shares today. 

Reasons for optimism

Temple & Webster made more profit in Q1FY21, due to a furniture and homewares boom, than it did throughout FY20. The company achieved $8.6 million in earnings before interest, tax, depreciation and amortisation (EBITDA), compared with $8.5 million in FY20. In addition, sales were up by 138%. In October thus far, the company reported that sales have more than doubled when compared with last year's figure. 

RBC Capital Markets analyst, Tim Piper, has said.

As the market leader in online-based furniture and homewares in Australia, TPW has benefited from the accelerating shift to online and we expect the step-up in penetration to remain in a sizeable proportion.

We think TPW can also continue to grow market share, which should compound the growth expected in the underlying market.

Foolish takeaway

The Temple & Webster share price has continued to see volatility. There are clearly conflicting views over valuations in the e-commerce space more broadly, which has likely contributed to this volatility. In addition, the AFR believes fund managers have also been taking profits.

However, the company is still reporting total sales performance as rocketing, even with national lockdowns largely over. Although this bodes well for the Temple & Webster share price, it remains to be seen if it will endure when the economy normalises.

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. 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 Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »