Why Is Farfetch (FTCH) Stock Soaring Today
Shares of online luxury marketplace Farfetch (NYSE: NYSE:)
jumped 18.1% in the afternoon session after reports suggesting founder, José Neves, is considering taking the company private. According to The Telegraph, Neves is reportedly talking to bankers and major shareholders. Chinese e-commerce giant Alibaba (NYSE:) and Swiss luxury conglomerate Richemont are said to be tentatively backing the move. The stock is likely trading higher due to the potential for shareholders to be paid a premium over the market price for their shares when the company goes private.
Is now the time to buy Farfetch? Find out by reading the original article on StockStory.
What is the market telling us:
Farfetch’s shares are very volatile and over the last year have had 67 moves greater than 5%. But moves this big are very rare even for Farfetch and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 31.9% on the news that the company reported second quarter results, which missed Wall Street’s expectations for key metrics, including gross merchandise value (GMV), active customers, revenue, and adjusted EBITDA. Notably, revenue missed by a significant margin and growth also slowed.
Looking ahead, the company lowered its full year GMV guidance meaningfully and also cut adjusted EBITDA guidance for the same period. During the earnings call, management highlighted macro challenges, explaining, “The reality is that the recovery has not been as robust as we had expected when we reported our Q1 results. And as a consequence, we have also reduced demand generation investment in this region. Like in the U.S., we believe this is not Farfetch specific as other luxury brands have similarly indicated China is not growing as quickly as previously expected after its reopening in December.”
Overall, the results were quite bad, with little to no major positives.
Following the disappointing results, Wall Street analysts downgraded Farfetch’s stock. KeyBanc analyst, Noah Zatzkin, lowered the stock’s rating from Overweight (Buy) to Sector Weight (Hold), citing “a less clear path to profitability.” Similarly, JP Morgan analyst, Doug Anmuth, lowered the stock’s rating from Overweight (Buy) to Neutral (Hold) and slashed the price target from $15 to $6.
Farfetch is down 52.6% since the beginning of the year, and at $2.09 per share it is trading 75.4% below its 52-week high of $8.50 from November 2022. Investors who bought $1,000 worth of Farfetch’s shares 5 years ago would now be looking at an investment worth $93.17.