Poshmark (POSH): 'Soft Results' Prompt Two Analysts to Downgrade to Neutral, Shares Collapse 32% as iOS Privacy Changes Hurt Business
Shares of Poshmark (NASDAQ: POSH) are down 32% in pre-open Wednesday after the company reported worse-than-expected Q3 results and guidance.
Poshmark reported Q3 EPS of ($0.09) to miss on the analyst estimate of ($0.07). Revenue for the quarter came in at $79.7 million versus the consensus estimate of $82.69 million.
“We delivered a solid quarter and our sixth consecutive quarter of operating profitability, despite difficult comparisons and the headwinds of Apple privacy changes, and our investments in marketing accelerated Trailing-Twelve-Months Active Buyer growth. We have a long runway of growth ahead, driven by strategic investments in product innovation, opening our platform to larger brands with Brand Closets, and expanding authentication services to cement our marketplace as the trusted choice for buyers, all of which will help fuel long-term growth of our business,” said Manish Chandra, Founder and Chief Executive Officer of Poshmark.
For this quarter, Poshmark sees Q4 2021 revenue of $80-82 million, versus the consensus of $85.1 million. Adjusted EBITDA is seen in the range of ($7.0) to ($8.0) million.
William Blair analyst Ralph Schackart downgraded to Market Perform from Outperform “overall positive bias on its differentiated model.”
Schackart outlines four factors behind the downgrade call: 1) IDFA seems to be having a more pronounced impact on its business, 2) Industry customer acquisition costs (CACs) are up 25%-75%, 3) COVID-19 has continued to hurt international markets, and 4) Incoming CFOs often set initial conservative guidance.
“We believe the combination of above factors likely places 2022 Street estimates at risk when it guides on the fourth-quarter call, plus the increased CACs and uncertainty around IDFA timeline workarounds, leading us to downgrade the shares,” Schackart said in a note.
MKM Partners analyst Roxanne Meyer downgraded to Neutral from Buy amid limited upside to fundamentals since going public. A new price target is $21.00 per share (down from $50.00).
The analyst cites lower than expected 3Q revenue and EBITDA coupled with a downbeat outlook for 4Q and 2022 as key reasons behind a downgrade.
“The results and outlook are disappointing for a high-growth company that will rely mainly on sales upside for a re-rating, and is occurring at a time when there is exceptional consumer demand industry-wide, and while other retailers have delivered strong upside. While we had viewed 4Q as a unique opportunity for POSH to capitalize on the supply chain constraints faced by the majority of the retail industry, 4Q guidance doesn’t assume a bullish outcome, and is below our prior view of sales and EBITDA,” Meyer wrote in a client note.
Shares are down 83.6% YTD.