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Why Poshmark Stock Tanked 22% at the Open Today

By Reuben Gregg Brewer - Mar 12, 2021 at 10:29AM

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The online retailer of secondhand high-end consumer goods didn't have a bad quarter, but the future may not be as nice as hoped.

What happened

Shares of Poshmark (POSH -0.27%), a "leading social marketplace for new and secondhand style," saw its stock drop a huge 22% or so in the first half hour of trading on March 12. That comes on the heels of the company's first-ever earnings release as a public company, which occurred after the market closed on March 11. The numbers were fine, but the outlook wasn't quite up to snuff.  

So what

Poshmark held its initial public offering in mid-January, and the stock has been on a downward slide ever since. Today just continued that trend, but this drop was driven by quarterly earnings. Only yesterday's financial results weren't actually that bad. The online retailer posted revenues of just over $69 million in the fourth quarter of 2020, up 27% from the roughly $55 million the company brought in the same period of 2019. That beat analyst expectations of $68 million or so. Adjusted earnings were $0.05 per share. Normally when a company beats expectations its stock goes up, but not this time. 

A man visibly upset with computer screens with stock charts on them in the background.

Image source: Getty Images.

Why? While Poshmark's past sales tally beat analyst projections, it is forecasting first-quarter 2021 revenues to fall between $75.5 million and $77.5 million. Wall Street was expecting something closer to $80 million. The market is forward looking, so the update didn't sit particularly well with investors who chose to vote with their feet and sold the stock.  

Now what

Poshmark is a very young company, publicly speaking, and chose to IPO during what are very turbulent times in the retail space. Although operating online is probably a plus, focusing on high-end fashion goods in a global pandemic may not be quite as great. Long-term investors, especially those with a conservative bent, should probably let Poshmark prove its model out over at least a few more quarters before jumping in here. It may have great long-term prospects, but at this point it's hard to make that call given the uncertainty in the market on top of the company's short trading history.

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