Redbubble (ASX:RBL) share price crashes 12% on Q3 update

The Redbubble Ltd (ASX:RBL) share price is under pressure on Thursday following the release of its third quarter update…

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The Redbubble Ltd (ASX: RBL) share price is crashing lower on Thursday morning.

In morning trade, the ecommerce company’s shares down a disappointing 12% to $4.84.

Why is the Redbubble share price crashing?

Investors have been selling Redbubble’s shares this morning following the release of its third quarter and year to date update.

In respect to the latter, for the nine months ended 31 March, Redbubble reported gross transaction value of $576 million and marketplace revenue of $456 million. This was up 85% and 82%, respectively, over the prior corresponding period.

Management revealed that a strong Australian dollar weighed on its financial performance during the period. On a constant currency basis, gross transaction value would have been up 94% and marketplace revenue would have jumped 97%.

This ultimately underpinned a 100% increase in year to date gross profit to $184 million and EBITDA of $51 million.

What about the third quarter?

While Redbubble’s top line growth is moderating, it remains very strong.

For the three months ended 31 March, gross transaction value increased 58% (79% in constant currency) to $134 million and marketplace revenue rose 54% (76% in constant currency) to $103 million.

Gross profit for the quarter was up 55% (78% in constant currency) to $40 million and EBITDA came in at $2.2 million.

The latter represents an EBITDA/Marketplace revenue margin of 2.1% for the quarter. This compares to its first half margin of 13.8%.

No explanation was given for the significant contraction in its margins. However, with its third quarter revenue approximately half of its second quarter revenue, this could have been the result of a reversal in operating leverage.

Whatever the cause, it seems to have caught the eye of investors today, leading to weakness in the Redbubble share price.

Today’s sizeable decline means that the Redbubble share price is now down 34% from its 52-week high.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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