Here’s why the Redbubble (ASX:RBL) share price is crashing 20% today

Redbubble’s shares are bursting on Tuesday…

| More on:
a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the IAG share price continue to fall

Image source: Getty Images

Key points

  • Redbubble shares are being hammered after underperforming during the first half
  • Increased competition weighed heavily on its margins during the second quarter
  • Management has downgraded its revenue and earnings guidance for FY 2022

The Redbubble Ltd (ASX: RBL) share price is under significant pressure on Tuesday morning

At the time of writing, the ecommerce company’s shares are down 20% to 52-week low of $2.39.

Why is the Redbubble share price crashing again?

Investors have been selling down the Redbubble share price following the release of another disappointing trading update.

According to the release, the heavily shorted ecommerce company’s gross transaction value (GTV) came in at $381 million for the six months ended 31 December. This represents a 14% decline over the prior corresponding period.

It was a similar story for its marketplace revenue, which fell 18% to $288 million. Management advised that this was due to cycling strong sales growth in the prior corresponding period, driven particularly by mask sales. Excluding mask sales, revenue would have been down 5% year on year.

Unfortunately, things got worse the further down the income statement you travelled. Gross profit dropped 25% to $108 million, gross profit after paid acquisition (GPAPA) tumbled 36% to $63 million, and EBITDA crashed 84% to just $8 million.

Management advised that its margins were crunched by strong competition in the second quarter which impacted organic demand and led to increasing paid acquisition costs. This may not go down well with the market, which has had concerns over Redbubble’s lack of customer loyalty for some time.

One positive, though, was that the company ended the period with a very strong cash balance of $143 million.

Outlook

Also likely to be weighing on the Redbubble share price this morning was management’s outlook for the remainder of FY 2022.

In October, the company guided to full year marketplace revenue slightly above FY 2021’s levels. However, this has now been downgraded to “slightly below” what was achieved last year.

It has also downgraded its EBITDA expectations. Instead of an EBITDA to marketplace revenue margin in the mid single digits, it now expects it to be “negative low single digits.”

And while the company’s CEO, Michael Ilczynski, remains positive on the future, it hasn’t been enough to stop investors selling down the Redbubble share price today.

He commented: “I am confident of the tremendous potential for the Redbubble Group. To capture this, we will continue to invest in our technology platforms, artist and customer experiences, and our brands. We have multiple growth levers at our disposal, and given our strong cash balance, we will continue to invest in order to realise the potential upside that can be unlocked by aggressively pursuing this opportunity.”

“We remain committed to our medium term aspirations to grow GTV to more than $1.5 billion, to grow Artist Revenue to $250 million, and to produce Marketplace Revenue of $1.25 billion per annum. EBITDA margin is also expected to expand over the medium-term with top-line growth,” he added.

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 over 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 January 13th 2022

Motley Fool contributor James Mickleboro 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 52-Week Lows

Zip share price Z1P A wide-eyed man peers out from a small gap in his black zipped jumper conveying fear over the weak Zip share price
52-Week Lows

Is the Zip share price set to hit another unhappy milestone this week?

Could the Zip share price slide below 90 cents?

Read more »

A man in business suit wearing old fashioned pilot's leather headgear, goggles and scarf bounces on a pogo stick in a dry, arid environment with nothing else around except distant hills in the background.
52-Week Lows

The Novonix share price just rebounded 13%. Is it a buy?

Novonix has had a very volatile day. Is the company worth buying?

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
Technology Shares

Why did the Xero share price just rebound 6%?

Xero shares have recovered from a 52-week low and are now in the green.

Read more »

Woman disappointed at share price performance with her hands on her face.
Technology Shares

Xero share price slumps to lowest price since 2020. Broker tips 50% upside

Xero shares have been exploring new depths today...

Read more »

A woman holds a piece of pizza in one hand and has a shocked look on her face.
52-Week Lows

The Domino’s share price just hit a 52-week low. Is it time to tuck into some?

Domino’s shares are down another 4%. Is the pizza business a buy?

Read more »

a person zips their jumprer completely over their head, covering their face and holds a hand to their head as if in despair.
BNPL shares

Zip share price slides another 5% to new multi-year low of $1

Wednesday was a rough day for Zip shares.

Read more »

Red arrow going down, symbolising a falling share price.
52-Week Lows

Is this opportunity knocking? 3 ASX shares hitting 52-week lows today

The All Ords is down and a bunch of ASX shares have hit 52-week lows. We profile three of them.

Read more »

a woman looks distressed as she stares dramatically at her phone watching the Megaport share price crashing today
Technology Shares

Here’s why the Megaport share price is tumbling 18% today

Top line growth was consistent throughout the quarter but ASX investors aren't impressed.

Read more »