- The stock price of Farfetch (FTCH) fell by over 2.5% pre-market today. This is why.
The stock price of Farfetch (FTCH) fell by over 2.5% pre-market today.
Why: Bearish research report
Price target: $6
Analyst: Citi analyst Guido Lucarelli
Lucarelli had initiated coverage on Farfetch while pointing out that it is difficult to see a clear path to profitability. And Farfetch has “certainly developed an advanced technology in online luxury and top-line should continue to benefit from the structural growth of the luxury sector and increased e-commerce penetration (CitiE: FY21-FY25e sales CAGR of 17%).”
While the shares were strong on the back of the announced YNAP deal with Richemont, Lucarelli saw 3 key issues:
1.) They don’t see the YNAP transaction as transformational to EBITDA margin, a deal arguably more relevant for Richemont
2.) Excluding the positive contribution from the Off-White license, EBITDA is still far from breakeven and benchmarking key metrics with peers highlights areas of weakness; and
3.) 2025 break clause on the Off-White license poses significant risks (about US$100 million) to EBITDA even though the highly profitable Reebok deal starting in Q1 2023 could be a significant offset.