Why the Kogan (ASX:KGN) share price is sinking 5% today

Kogan is ending the month deep in the red…

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The Kogan.com Ltd (ASX: KGN) share price looks to have run out of steam on Wednesday.

In late morning trade, the ecommerce company’s shares are down 5% to $12.15.

Why is the Kogan share price under pressure today?

While there has been no news out of the company today, there are a number of potential explanations for the weakness in the Kogan share price.

The first one is the fact that today is the final day of the financial year, which often sees plenty of tax-loss selling.

Tax-loss selling involves selling shares that have incurred a capital loss, which may then offset capital gains realised throughout the financial year. So, with the Kogan share price down 18% over the last 12 months and 37% since the start of the year, it is a prime candidate for tax-loss selling.

What else could be weighing on its shares?

Another potential explanation for the decline in the Kogan share price today is profit taking. After all, prior to today, the company’s shares were up a massive 25% since the start of June.

Investors have been fighting to get hold of its shares due to the recent outbreak of COVID-19, which has led to lockdowns across several states.

This bodes particularly well for Kogan which recently revealed that it had excessive inventory and was struggling to shift it. With millions of consumers forced online again this month, Kogan may be able to bring its inventory under control sooner than expected.

Is this a buying opportunity?

Despite its rampant rise this month, analysts at Credit Suisse still see a lot of value in the Kogan share price.

The broker currently has an outperform rating and $17.93 price target on its shares. This implies potential upside of 47.5% over the next 12 months.

Credit Suisse believes the headwinds Kogan is facing are only temporary and remains positive on its longer term growth prospects.

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