Cettire Ltd (ASX: CTT) shares were sold off on Tuesday.
The online luxury products retailer's shares crashed 17% to $1.77 after its first quarter update fell well short of the mark.
Unfortunately, the popular ASX 300 stock has just been dealt more bad news, with one of its most bullish brokers turning on it.
What is the broker saying about this ASX 300 stock?
According to a note out of Bell Potter, its analysts were a touch disappointed with the company's margins during the quarter. They said:
Cettire (CTT)'s 1Q25 (Jul-Sep) net revenue of $155m (+22% on pcp) was ahead of BPe, however Adjusted EBITDA margins of 1.2% a miss to BPe. The seasonally key 2Q has seen sales growth slowing down to +5% on pcp led by the profit optimisation and as CTT cycles stronger comps of +80%. Positively, the company noted healthy Adjusted EBITDA margins of +5% for the month of September assisted by delivered margins of ~17% and the pull-back in the marketing investment to ~8% of net revenue. The cash position of $66m was below BPe driven by the slower growth in EBITDA.
In light of this soft performance, the broker has trimmed its revenue and earnings estimates. It adds:
We make changes to our revenue forecasts as we factor in the slower growth in 2Q topline which we expect to remain through the rest of 2Q and 3Q as CTT cycles comps of +87% and +88% respectively.
While the margin trends appear healthy at +5% exiting the 1Q, we await to see the overall/delivered margins in the seasonally largest 2Q (~30% of FY revenue) given the competition that we expect to return in the highly promotional period ahead. Our EBITDA forecasts -7.1%/-8.5%/-8.4% for FY25/26/27e.
Downgraded to hold
The note reveals that Bell Potter has downgraded the ASX 300 stock to a speculative hold rating (from buy) with a $2.00 price target.
While this still implies potential upside of 13%, it isn't a compelling enough risk/reward to justify a better rating. It explains:
While we remain cautious on the upcoming 2Q promo period, we think CTT will continue to outperform their peer group similar to the current performance of +5% vs the overall luxury industry in decline with the ambition to retain healthy EBITDA margins of ~5%. However, at our unchanged PT of $2.00 the total expected return is <15% so we downgrade our recommendation to a HOLD rating and lift the previous Speculative Risk rating.
