Redbubble (ASX:RBL) share price has surged 16% in 9 days. Is it a buy?

Could Redbubble be a buying opportunity at its current price?

| More on:
a girl in a red t-shirt stands against a red door blowing bubbles through a red bubbleblower.

Image source: Getty Images

The Redbubble Ltd (ASX: RBL) share price has seen better days than today. At the time of writing, the global online marketplace is in the red by 4.29%, at $4.355 per share.

However, the Redbubble share price has surged approximately 15% in value over the past 9 trading days. That’s rather impressive considering many investors would be stoked with a 15% return over the course of a year.

Additionally, shareholders have experienced a strong bounceback from the $3.19 price witnessed in August, rallying 37% since then.

This poses the question: is now the time to buy Redbubble shares? Let’s see what brokers and fund managers think of the opportunity.

Is Redbubble a buy on the ASX?

Despite being included in the S&P/ASX 200 Index (ASX: XJO) back in April, the Redbubble share price suffered a swift fall soon after. This was instigated by a trading update from the company pointing out an increase in investments to drive its top-line growth.

However, investors seem to have had a change of heart following the release of the company’s full-year results for FY21. Some notable items in its financials for the period included marketplace revenue increasing 58% to $553 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) skyrocketing 930% to $53 million.

Since reporting these numbers, some brokers and fund managers have shared bullish perspectives on the eCommerce player.

Firstly, leading broker Morgans considers Redbubble a serious ASX opportunity. The broker currently has a buy on the company with a price target of $4.83. Importantly, it sees a lot of growth potential ahead for Redbubble.

For reference, the company is aiming to reach $1.25 billion per year in marketplace revenue in the next few years. This would represent an increase of 126% on its latest full-year revenue. If achieved, that would certainly be a significant level of growth.

Fund manager thoughts

Meanwhile, as we recently covered, EGP Capital is a big fan of Redbubble. At the end of August, the company was its fourth-largest holding in the Concentrated Value Fund.

The fund’s chief investment officer Tony Hansen spoke highly of Redbubble’s management and is optimistic for the company’s medium-term prospects.

I remain very positive about the medium-term prospects of RBL, now that the marketplace has reached scale, the key decisions are around how to deploy cashflows in search of business optimisation. Each new time I hear CEO Mike Ilczynski discuss his strategy, I am more convinced he has a very clear vision for how best to position the business.

Additionally, Hansen notes that ASX-listed Redbubble could be enticing to US-based Etsy Inc (NASDAQ: ETSY) as a potential acquisition candidate.

Redbubble currently trades on a price-to-earnings (P/E) ratio of 38.61.

Should you invest $1,000 in Redbubble right now?

Before you consider Redbubble, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Redbubble wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Etsy. 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.

More on Consumer Staples & Discretionary Shares