Should You Buy the Dip in This Online Apparel Company?

This online apparel resale company’s trailing-12-months active buyers reached 7.3 million in the third quarter of 2021, increasing 17% year-over-year. The Redwood City. Calif.-based company recently launched the first-of-its-kind Brand Closet program, opening its social marketplace to brands. It also acquired…

Suede One, a platform that combines machine learning, computer vision, and expert human review to virtually authenticate sneakers.

However, Poshmark, Inc. (POSH – Get Rating) posted a wider-than-expected third-quarter loss and warned that Apple’s (AAPL) recent privacy changes would lead to higher marketing spending.

The stock has lost 9.2% in price over the past month and 29.1% over the past three months to close Friday’s trading session at $20.97. In addition, it is currently trading 80% below its all-time high of $104.98, which it hit on January 14, 2021. So, POSH’s near-term prospects look uncertain.

Here is what could influence POSH’s performance in the coming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For its fiscal third quarter, ended September 30, 2021, POSH’s revenue surged 16% year-over-year to $79.70 million. The company’s gross merchandise value increased 18% year-over-year to $442.50 million.

However, its adjusted EBITDA for the quarter decreased 98.3% year-over-year to $257,000. In comparison, its non-GAAP operating loss came in at $570,000, compared to $14.28 million in income in the prior-year period. Its net loss was $7.20 million, compared to $10.77 million in income in the year-ago period.

Ongoing Investigations

 

A law firm is investigating potential claims against POSH on concerns over whether it complied with federal securities laws. There are allegations that the company reported a  $0.09 per share loss on Nov. 9 compared to a profit of $0.44 per share in the third quarter of 2020, citing difficult comparisons and the headwinds of Apple privacy changes contributing to its financial results.

Low Profitability

In terms of trailing-12-month CAPEX/Sales, POSH’s 0.62% is 73.6% lower than the 2.36% industry average. Its 0.71% trailing-12-month asset turnover ratio is 32.9% lower than the 1.06% industry average. Furthermore…

 

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