Redbubble (ASX:RBL) share price on watch after first quarter update

Which direction will the Redbubble share price go after its first quarter update?

| More on:
a smiling woman with a satisfied look on her face lies on a rug in her home with her laptop open and a large cup on the floor nearby, gazing at the screen.

Image source: Getty Images

The Redbubble Ltd (ASX: RBL) share price could be a mover on Thursday after the company released its first quarter trading update.

How did Redbubble perform in Q1?

It has been a wild ride for the Redbubble share price, especially following its FY21 full-year results. Today, the company was pleased to announce that its trading performance in the first quarter came in line with expectations.

The global marketplace was continuing to retain the majority of the accelerated revenue growth that it experienced during FY21.

Redbubble said that it saw an improved performance from July to September, and reiterates the FY22 outlook statements it provided in August.

Despite the company’s positive commentary, its financial performance may appear discouraging at face value, which could weigh on the Redbubble share price.

Its first quarter financial highlights include:

  • Gross transaction value of $142 million, down 21% on the prior corresponding period (pcp)
  • Marketplace revenue of $106 million, down 28%
  • Gross profit of $42 million, down 34%
  • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $3.9 million, down 85%
  • Operating cash inflow of $11 million, compared to $27 million in 1Q21
  • Cash balance of $109 million at 30 September

Redbubble advised that excluding masks and on a paid basis, underlying 1Q22 marketplace revenue was down 6%.

Encouragingly, as the quarter progressed, underlying marketplace revenue improved from negative 11% in July to negative 2% in September.

From an operational perspective, the company continued to deliver initiatives to drive growth.

During the quarter, Redbubble successfully launched Afterpay Ltd (ASX: APT) services for its customers in the United States, Canada, United Kingdom and Australia.

The company was also driving a number of ‘experiments’ to drive customer retention and improve the discoverability of new artists. As well as the introduction of new products and line extensions including dad hats, baseball caps, desk mats, mousepads and iPhone 13 cases.

What’s next for Redbubble?

The Redbubble share price has been moving in a volatile fashion as it adjusts to lower growth expectations.

Looking ahead, the company said that its marketplace revenue growth in the first half of FY22 will likely be negative year-on-year. In the second half, the company believes there will be a steady return to year-on-year growth rates.

As previously stated, the company’s targeted investments will weigh on gross margins, with EBITDA margins as a percentage of marketplace revenue expected to be in the mid-single digit range of FY22.

Redbubble share price snapshot

The Redbubble share price is down 23% year-to-date, largely driven by a 23% single-day selloff on 22 April.

In recent weeks, the Redbubble share price has managed to find its footing around the low-mid $4 level.

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 Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

More on Consumer Staples & Discretionary Shares