The Redbubble Ltd (ASX: RBL) share price has had a rough run in 2021, but today it surged 4.27% to $3.91.
Investors ran for the exit back in April when the ecommerce company unveiled plans to sacrifice profit margins to deliver its ‘aspirational’ $1.25 billion revenue vision.
Such an increase in revenue would represent a doubling in Redbubble’s current annual revenue.
However, since June the company has been crawling its way out of what appears to be a bottoming in the Redbubble share price, with one fund manager seeing the company as a significant opportunity.
Let’s take a look…
Fund manager sees opportunity
EGP Capital is a Sydney-based fund manager that invests in Australian-listed companies with smaller market capitalisations. Typically, the fund holds 25 to 35 stocks, usually with the 5 largest holdings making up 50% of the portfolio.
Redbubble is hovering around the sixth largest position in the EGP Capital Concentrated Value Fund.
According to EGP’s May report, the fund took advantage of the negative sentiment towards the Redbubble share price and added to their position.
Explaining the rationale behind the optimism to investors, EGP said in its report:
RBL is an incredible marketplace, the likes of which are seldom created and even more rarely available at the type of value investors pricing the market is currently ascribing to the business. ETSY has just acquired a business which appears to be meaningfully inferior to RBL for more than twice RBL’s current market capitalisation. If the market does not soon wake up to the opportunity RBL currently presents, it may suffer a similar fate.
EGP appears to be referring to the peer-to-peer social shopping app, Depop.
Depop recorded $650 million in gross merchandise sales and $70 million in revenue in 2020, with a 10% take rate. Etsy Inc (NASDAQ: ETSY) is acquiring Depop for US$1.625 billion.
By comparison, in its Q3 FY21 update, Redbubble reported $577 million in gross transaction value year-to-date. Additionally, the company pulled $456 million in revenue.
Redbubble has a market capitalisation of $1.026 billion based on today’s closing price.
The Redbubble share price is down 34% year-to-date but is up 65% over the past 12 months.
Other Redbubble share price news
The Redbubble share price looks unfazed by the recently announced inquiry launched by the Australian Competition and Consumer Commission (ACCC).
The inquiry will examine the practices of online marketplaces such as eBay Australia, Kogan.com Ltd (ASX: KGN), and others. It will particularly focus on the relationships with third-party sellers and consumers and how they affect competition.
Lastly, Redbubble will report its FY21 full year results on 19 August.
Investors will keep their eyes peeled for that one!