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Is the Kogan (ASX:KGN) share price sinking back to reality?

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The Ltd (ASX: KGN) share price is not having a fantastic time of late. At the time of writing, Kogan shares have shed 3.4% to $13.79 a share. Not that there has been any major news out of the e-commerce company.

Well, apart from an ASX posting that informed the markets that Kogan’s new director, James Spencely, has an interest in his new company of approximately zero shares. Yep, zip and nada. That’s not exactly inspiring, but also probably not the likely reason why investors are selling out of Kogan today.

In fact, today’s move in the Kogan share price is actually a continuation of a trend that has been playing out for some time. Kogan lost a hefty 22% over the month of February alone. It’s also down almost 30% year to date in 2021 so far. And since it last reached its reigning all-time high share price of $25.57 back in October last year, the Kogan share price has lost 45% of its value. Ouch.

But, as Einstein taught us, everything is relative. Kogan is still way in front if you go back 12 months (up 211%). And if you backtrack 5 years, investors are still enjoying gains of around 805%. Not including dividends.

Still, Kogan has indisputably had a few months to forget. So why the pessimism from investors of late?

Kogan share price comes off the boil

Well, to answer that, let’s take a look at why Kogan shares rocketed last year to begin with. Kogan was one of the rare absolute winners of the coronavirus pandemic. With retail stores in lockdown last year, Kogan’s online store (which sells almost everything) suddenly became hot property. In its quarterly update for the 3 months ending 30 June last year, Kogan reported a gross sales increase of 95% and profit growth of 115%. That update in July helped push Kogan up another 20% when it hit its all-time high in October.

But here’s the thing. Investors can often get a bit carried away, especially with growth stock like Kogan. When presented with numbers like that, it can be easy to forget that it’s possible that those numbers were more of a pandemic-induced one-off than a ‘new normal’ for the company.

Kogan recently delivered its half-year earnings report for the 6 months to 31 December 2020. Even though it presented investors with another unquestionably strong set of numbers, it wasn’t enough to stop the Kogan share price fr0m tanking 9% that day.

Sometimes, investors just push a quality company’s share price too high. That is what might have happened last year. But although investors who bought into the hype back then are licking their wounds today, it’s all relative if you look further out.

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Sebastian Bowen 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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