The Redbubble Ltd (ASX: RBL) share price has fallen by over 47% over the last six months.
What is Redbubble?
The company describes itself as the owner and operator of leading global online marketplaces, Redbubble.com and TeePublic.com. Its community of passionate artists create uncommon designs on high-quality, everyday products such as apparel, stationery, housewares, bags, wall art and so on.
When did the Redbubble share price start falling?
The Redbubble share price fell 23% to $4.24 on the same day it released an update to the market.
In that update, Redbubble released a trading update. FY21 third quarter marketplace revenue went up 54% to $103.4 million, gross profit grew 55% to $39.8 million, earnings before interest, tax, depreciation and amortisation (EBITDA) went up $8.5 million to $2.2 million and earnings before interest and tax (EBIT) increased 91% to a loss of $0.9 million.
Redbubble also told investors about its FY21 year to date performance, with that latest quarter included. Marketplace revenue was up 85% to $456 million, gross profit was up 100% to $184 million, EBITDA was up $53 million to $51 million, EBIT was up $53 million to $41 million and operating cash inflow was up $48 million to $54 million.
The ASX share also told shareholders about its plans for the future.
Redbubble believes that its addressable market is around US$300 billion in core geographies and product categories. Within that, around 35% to 40% of customers are looking for something unique and meaningful.
Management believe that the structural shifts in 2020 to e-commerce are expected to endure. The company also said that the growing 'creator economy' enables scalable growth and it's a dynamic source of unique designs.
Longer-term goals
Redbubble said that over the medium-term, its aspiration is to drive top-line growth, enabling a step change in scale and artist impact.
The company pointed to a few advantages of growing in scale:
Delivering value to artists inspires them to create more unique content.
Driving top line growth for Redbubble through customer acquisition and loyalty reinforces its competitive position.
Scaling the network impacts the customer experience and unit economics.
In 2024 onwards, the company is aiming for $1.25 billion of marketplace revenue. This goal translates to $1.5 billion of gross transaction value and $250 million of artist revenue.
Redbubble believes this is possible through organic investment and growth. It's also going to look for acquisition opportunities that will help deliver or amplify this aspiration.
In the short-term, EBITDA as a percentage of marketplace revenue is expected to be in the mid-single digit range over an annual period. After reaching $1.25 billion of marketplace revenue, Redbubble expects the EBITDA margin to be in between 10% to 15%.
Is the Redbubble share price worth looking at?
The broker Morgans currently rates Redbubble shares as a hold, with a price target of $4.88, which suggests a potential return of more than 40% over the next 12 months.
Morgans pointed out that the growth investing is happening right when it's going up against strong sales in the prior corresponding period. The broker doesn't believe that mask sales made in 2020 can be repeated in 2021.
