What happened
Shares of Poshmark (POSH), a clothing resale e-commerce company, got crushed on Thursday after the company reported financial results for the first quarter of 2021. Results exceeded expectations but investors are worried about forward guidance, resulting in the stock's continued slide. As of 10 a.m. EDT, Poshmark stock is down 17% and has now plummeted 64% from its all-time high earlier this year.
So what
Poshmark just had its initial public offering (IPO) in January, pricing at $42 per share and closing its first day of trading over $100 per share. Since then, the stock has been steadily declining, heightening investors' anticipation for its Q1 report. In Q1, Poshmark generated revenue of $81 million, up 42% from the same quarter last year. For perspective, management had only guided for Q1 revenue of $75.5 million to $77.5 million.
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For the bottom line, Poshmark's management had only given guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Just like its top-line outperformance, the company exceeded guidance here as well. Guidance called for adjusted EBITDA of $1 million to $2 million. But in Q1, Poshmark had adjusted EBITDA of $4.2 million.
Now what
Given how it outperformed management's guidance, we can't say Poshmark stock is selling off because of results. Rather, forward guidance likely left the market wanting more. For the second quarter, the company is projecting revenue of $79 million to $81 million and adjusted EBITDA of $1.5 million to $2.5 million. The revenue guidance only represents year-over-year growth of 18% to 21% and the market simply has an appetite for faster growth than that right now.
If shareholders are looking for encouragement, consider Poshmark's take rate. As a platform company, it doesn't sell products, but rather took a healthy 18.4% cut from sales in Q1. Some worry that this take rate is too high and that Poshmark may be forced to trim this in time to compete better with its cheaper rivals. However, for now, its take rate is holding fairly steady. Last year, its take rate was only marginally better at 18.5% and for the second quarter, management expects a take rate in line with Q1.
Maintaining its healthy take rate is important to a Poshmark investment thesis and for now it's holding up.
