Kogan (ASX:KGN) share price crashes 13% on Q3 update

The Kogan.com Ltd (ASX:KGN) share price is crashing 13% lower on Friday after releasing a disappointing third quarter update today…

| More on:
asx share price fall represented by investor with head in hands

Image source: Getty Images

The Kogan.com Ltd (ASX: KGN) share price is well and truly out of form on Friday.

In afternoon trade, the ecommerce company’s shares are down 13% to $10.80.

This means the Kogan share price is now down 58% from its 52-week high.

Why is the Kogan share price crashing lower?

Investors have been heading to the exits in their droves today after Kogan became the latest ecommerce company to release a disappointing third quarter update.

This follows similarly poorly received releases by Redbubble Ltd (ASX: RBL) and Temple & Webster Group Ltd (ASX: TPW) earlier this week.

What did Kogan report?

For the third quarter of FY 2021, Kogan reported gross sales growth of ~47% and revenue growth of ~65% across its businesses.

This was driven by a 77% increase in active customers over the prior corresponding period to 3,215,000 for Kogan.com and 742,000 for Mighty Ape.

This compares to active customers of 3,003,000 for Kogan.com and 719,000 for Mighty Ape at the end of December.

Earnings decline

While the above looks very positive, it went downhill quickly from there. Which is why the Kogan share price is crashing lower today.

Although its gross profit rose over 54%, its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell more than 24% compared to the prior corresponding period.

This decline was driven by its core Kogan.com business, which reported a significant increase in operating costs. This led to this side of the business posting an adjusted EBITDA decline of more than 42% for the period.

What’s causing this?

Kogan explained that during the quarter customer demand fluctuated below the levels seen in the prior nine months. As a result, the company was required to store larger than expected levels of inventory.

This led to Kogan incurring high storage expenses and demurrage fees.

The company has been progressively working towards optimising the inventory position to reflect current market conditions. However, this is being done by increasing its promotional activity, which could weigh on margins in the near term.

Also weighing on its performance is price inflation. This is being seen for many products currently being planned for reorder in advance of the peak Christmas trading period.

Is the Kogan share price in the buy zone?

Brokers have yet to react to this update, so it is difficult to say whether the Kogan share price is now in the buy zone.

But prior to today, Credit Suisse had an outperform rating and $20.85 price target and UBS had a neutral rating and $15.10 price target.

Both price targets are significantly higher than the current Kogan share price of $10.80.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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

More on Share Fallers

asx share price falling lower represented by investor wearing paper bag on head with sad face
Share Fallers

These were the worst performing ASX 200 shares last week

It was another tough week for the S&P/ASX 200 Index (ASX: XJO) after the US Federal Reserve indicated that it would start …

Read more »

share price dropping
Share Fallers

Why AnteoTech, Newcrest, Nitro, and ResMed shares are falling

In late trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week with on a positive note. …

Read more »

Young boy with glasses and grey long sleeved top looking pensive as if wondering about asx share price
Share Fallers

The OZ Minerals (ASX:OZL) share price has dumped 11% this week. Is it a bargain?

Key points OZ Minerals shares are down 11% so far since last Friday’s close Despite the bearishness, the team at …

Read more »

share price dropping
Share Fallers

Why Evolution, Cettire, Hipages, and Kogan shares are sinking

After a decent start to the day, the S&P/ASX 200 Index (ASX: XJO) is tumbling lower again in afternoon trade. At …

Read more »

a man in a hard hat and checkered shirt holds paperwork in one hand as he holds his hands upwards in an enquiring manner as though asking a question or exasperated by uncertainty.
Share Fallers

OZ Minerals (ASX:OZL) share price slips despite record $2 billion revenue

The OZ Minerals Ltd (ASX: OZL) share price is sliding during this morning’s session and is now trading 1.48% in the …

Read more »

A man in a white coat holds a laptop in one hand and his head in the other, it's bad news.
Share Fallers

Polynovo (ASX:PNV) share price melts 31% in 2 weeks. What’s going on?

Key points The Polynovo share price has slipped more than 30% in the past 2 weeks Pressure has been on …

Read more »

An arrow crashes through the ground as a businessman watches on.
Share Fallers

Why Accent, BrainChip, Fortescue, and Novonix shares are sinking

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on track to record a big decline. At the time of …

Read more »

A guys points his fingers down.
Share Fallers

Why Adairs, Bigtincan, Regis Resources, and Telix shares are sinking

In afternoon trade on Monday, the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a decline. …

Read more »