Cettire Ltd (ASX: CTT) shares were under pressure on Friday.
The ASX tech stock ended the day approximately 5% lower at $3.12.
This was all the more disappointing given that the online luxury products retailer's shares were up as much as 13% in early trade.
It seems that the company's profits in the third quarter were well short of expectations and overshadowed Cettire's strong top-line growth.
In case you missed it, for the three months ended 31 March, Cettire's gross revenue increased 95% over the prior corresponding period to $256.7 million. However, its unaudited adjusted EBITDA came in at just $6 million for the three months on a delivered margin greater than 20%.
This compares to its first-half adjusted EBITDA of $26.1 million on a delivered margin of 23.2%.
This latest decline means that the ASX tech stock has now lost 36% of its value since peaking at a high of $4.90 in February.
While this is disappointing, the team at Bell Potter believes it could have created a buying opportunity for investors.
Bell Potter upgrades beaten down ASX tech stock
According to a note from this morning, the broker has upgraded Cettire's shares to a buy rating with a reduced price target of $4.00 (from $4.50).
Based on its current share price, this implies a potential upside of 28% for investors over the next 12 months.
Commenting on the quarterly update, Bell Potter said:
Cettire (CTT) provided a 3Q24 trading update (Jan-Mar) and sales revenue of $168m (+88% on pcp) was a ~14% beat to BPe, however Adjusted EBITDA margins of ~3% a miss to BPe. Outlook commentary for the seasonally key 4Q was provided as "well positioned for Q4, supported by seasonally improving metrics, growing supply and resilient demand" while the China launch confirmed for the 4Q24 which was ahead of our expectations. The cash position of $90m was in line with the usual seasonality.
Nevertheless, the broker sees value in the ASX tech stock now and thinks investors should be taking advantage of the pullback. It adds:
Our PT decreases 11% to A$4.00 (prev. A$4.50) driven by our earnings revisions and changes to cash flow assumptions. We continue to believe that CTT's ability to outperform their peer group far outweighs others in the luxury e-commerce market which has seen higher levels of consolidation across large to smaller players, while further complemented by CTT's lower ~0.9% market share and flexibility in the dropship inventory model. CTT is down ~22% from its recent peak and at the current share price, we see risk-reward to the upside for the name. At our updated PT of $4.00, the total expected return well exceeds 15% so we upgrade our recommendation to BUY.
