There are a few different reasons why the Redbubble Ltd (ASX: RBL) share price could be a good one to consider for the long-term.
Redbubble is an e-commerce platform business. It sells a wide range of products that have designs on them which have been created by artists. Those artists receive a slice of each sale. Items like wall art, phone cases and clothes are among the categories that people can choose to buy.
Morgan Stanley currently rates the business as a buy, with a current price target of $6.50. That's more than 90% higher than where it is today.
Here are a few compelling reasons why the Redbubble share price could be one to watch.
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Large addressable market
Redbubble says that the e-commerce spending in its current addressable product categories in 'core geographies' was $300 billion in 2020 and is expected to rise to $400 billion in 2024. That would be growth of more than 9% per annum.
The total global addressable market in its product categories is expected to be more than $1 trillion by 2024.
The company says it's benefiting from a number of useful macro trends including structural shifts to e-commerce (which are expected to endure), increasing customer demand for unique and meaningful products, a growing creator economy and customers looking for sustainability and corporate responsibility.
Within the company's core market, more than a third of customers are supposedly seeking something that is "unique and meaningful".
Management believe that it has "truly global" opportunities with the potential "expand across all geographies".
Repeat customer spending is growing
Redbubble is seeing a growing number of sales coming from repeating customers.
In FY21, the ASX tech share saw that repeat purchases made up 42% of marketplace revenue (which is revenue after paying the artists). Last financial year, repeat purchases increased 67% year on year to $232 million of marketplace revenue.
Morgan Stanley thinks that returning customers buying products is an important part of Redbubble's future and can help it achieve its longer-term goals. This could be a helpful factor for the Redbubble share price.
The company continues to invest in new and improved ways to reach customers, including its apps.
It is doing a number of loyalty experiments, with some showing "early positive retention signals."
Long-term growth plans
The business has a goal of reaching $1.25 billion of marketplace revenue in the longer-term.
It's going to invest in four key areas. The first is artist activation and engagement. Second, user acquisition and transaction optimisation. Third is customer understanding, loyalty and brand building. Fourth is product range and the third party fulfilment network.
In the shorter-term it is going to invest heavily and grow its global market leadership in the artist product space.
But over the longer-term, this growth is expected to lead to a rising earnings before interest, tax, depreciation and amortisation (EBITDA) margin as operating leverage builds.
Geographic expansion remains a longer-term aspiration for the business.
