Why is the Kogan share price leaping 5% today?

Kogan shares are catching a break today.

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The Kogan.com Ltd (ASX: KGN) share price is getting a boost this Friday.

At the time of writing, shares in the online retailer are trading 5.35% above their previous close at $3.74. This upwards move is despite there being no news out from the company today.

Although, Kogan is not alone in its positive reception today. Other online retailers such as Temple & Webster Group Ltd (ASX: TPW) and Adore Beauty Ltd (ASX: ABY) are also feeling some love on Friday, lifting 4.03% and 11.03% respectively.

Woolies flips the switch on eCommerce sentiment

After a boom period during the heights of COVID-19, online retailers have struggled to catch support in 2022. This is evident by taking a quick look at the Kogan share price since the start of the year, which is down 57%.

The return of shoppers to more traditional brick-and-mortar stores as the economy reopens has weighed on the growth of e-commerce this year. Simultaneously, companies like Kogan have struggled with managing inventory as supply chain issues persist. As such, investors have been cashing out of retail shares.

However, some enthusiasm has returned to the sector today after Woolworths Group Ltd (ASX: WOW) announced its intentions to take an ~80% stake in MyDeal.com.au Ltd (ASX: MYD). Notably, the proposed deal values the online marketplace at a 62.8% premium to its previous closing price.

In response, investors are bidding up the MyDeal share price to above $1 to more closely value the company with the proposed $1.005 per share offer.

This would indicate Woolworths is valuing MyDeal at 5.4 times price-to-sales. For comparison, the current Kogan share price represents a price-to-sales ratio of approximately 0.5 times.

TradingView Chart

Potentially investors are seeing a pricing discrepancy between current market prices for other online retailers. As shown above, the Kogan share price has experienced a 63.6% fall over the last year. Meanwhile, the MyDeal share price is now up 82.7% following Woolworths’ interest.

Short interest in Kogan share price

The Kogan share price featured in last week’s top 10 most shorted ASX shares. With short interest at 10.3%, the company’s shares are likely to experience higher volatility as shorters look to cover their position on positive news.

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. has positions in and has recommended Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has positions in and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Adore Beauty Group Limited and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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