The Redbubble (ASX:RBL) share price has halved from its all-time highs

The e-tailer was a major beneficiary of the pandemic but has fallen from grace in recent times.

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ASX share price slide represented by investor slipping on banana skin

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The Redbubble Ltd (ASX: RBL) share price has continued to tumble in May. After recording a disappointing performance in April, shares in Redbubble are down more than 15% this month.

The company’s shares started the year strong, hitting an all-time high of $7.35 in January.  Since then, they have more than halved, trading at $3.47 apiece at the time of writing.

What’s been impacting the Redbubble share price?

The initial catalyst that sent Redbubble shares tumbling can be traced back to February. Shares in the company took a dive after the company released its half-year results for 2021.

For the 6 months ending 31 December, Redbubble reported a 96% increase in marketplace revenue of $352.8 million. Its gross profit also increased 118% for the period to $144 million. In addition, the company reported strong customer demand with 572,000 artists making sales.

Despite the promising results, Redbubble noted that customer orders were significantly affected by COVID-19 constraints during the Christmas period. With 69% of Redbubble’s business coming from the United States, the company attributed order delays to temporary issues with its shipping partners.

The falls continue

In April, the Redbubble share price continued to fall after the company released its update for the third quarter.

For the nine months ending 31 March, Redbubble reported gross transaction value of $576 million and marketplace revenue of $456 million. Respectively, these figures were up 85% and 82%, from the prior corresponding period.

However, investors were left disappointed after Redbubble reported shrinking margins. For the first half, the e-tailer reported an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 13.8% compared to 2.1% for the third quarter. According to Redbubble’s management, smaller margins are the result of the company chasing revenue growth and increasing operating expenses.

What’s next?

Redbubble is an ASX-listed online marketplace connecting independent artists with consumers or businesses that want to buy their products. Shares in Redbubble were flying in 2020 as the company benefitted from the consumer shift to e-commerce.

The company announced an ambitious revenue target of $1.25 billion by 2024. As a result, Redbubble’s management informed investors that temporary sacrifices in profit margins must be made. The company noted that there is a huge opportunity in meeting the demand of e-commerce consumers.

Some analysts have highlighted that Redbubble’s business model and growth profile is still appealing despite the falling share price.

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Motley Fool contributor Nikhil Gangaram 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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