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Why the Kogan (ASX:KGN) share price is underperforming

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The Ltd (ASX: KGN) share price has underperformed the S&P/ASX 200 Index (ASX: XJO) by 13% so far in November. This follows the company’s phenomenal share price run from around $4 to $25 between March and October this year. How did an ASX 200 growth superstar turn sour so quickly? 

What’s happened to the Kogan share price?

Weakness in ASX shares that benefitted from lockdowns 

The recent rotation from tech and growth shares into value and cyclical shares could be weighing down on the Kogan share price. This rotation has seen the likes of airlines, travel shares and banks make significant share price recoveries, which is reflected by the recent surge in the ASX 200 to above the 6,600 level. 

While, we could attribute some blame to the recent rotation and weakness in sectors that benefitted from the lockdown, the Kogan share price is still underperforming some of its e-commerce and retail peers. The JB Hi-Fi Limited (ASX: JBH) share price, for example, is only down 7% this month. Meanwhile, the Redbubble Ltd (ASX: RBL) share price made a swift rebound to be up 17%. 

Shareholders divided over executive bonus 

Last Friday, Kogan shareholders approved the grant of options for Kogan co-founders, Ruslan Kogan and David Shafer. The vote was close, with 56% of shareholders for approval and 42% voting against.

The deal was struck at the height of the COVID-19 sell-down when the Kogan share price was trading at around $4 to $5. Therefore the exercise price for the options at $5.29 per share seemed reasonable at the time. 

However, at today’s Kogan share price, these options would be immediately in-the-money and represent a handy $70 million pay packet for the co-founders. 

Foolish takeaway

One could argue the Kogan growth story is still intact, with the first four months of the financial year delivering a 131.7% increase in gross profit and a 268.8% increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). The company’s strong performance has been attributed to more customers relying on Kogan to deliver goods for their homes and businesses during the period. We are now entering the peak Christmas trading period. November and December are typically the most important months of the year for the business, with strong trading performances having been delivered during these months throughout prior years. 

While the growth story may still appear to be fundamentally sound, the Kogan share price has seen significant selling volume in the past two weeks. Kogan shares are, however, still up nearly 120% year to date and more than 300% from their March lows. 

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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ltd. The Motley Fool Australia has recommended 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.

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