Poshmark (POSH) has struggled since its IPO, with the stock down roughly 80% since its debut earlier this year. Shares have tumbled as the pandemic tailwinds have faded, but is there hope for a recovery?
In this episode of "Upgrade or Topgrade" recorded on Nov. 12, Millionacres Editor Deidre Woollard and Fool Contributors Jeremy Bowman and Nick Rossolillo discuss Poshmark's challenges and whether the stock can turn it around.
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Deidre Woollard: One of my questions is, what is Poshmark doing wrong? Because the numbers are pretty good, but the market doesn't seem to like them very much.
Jeremy Bowman: I think there was a lot of enthusiasm. It's funny to me that both of these, thredUP and Poshmark, went public earlier this year, and maybe some people saw these as pandemic plays. People are stuck at home where we want to sell our clothes, we want to maybe buy clothes, just secondhand to keep ourselves occupied. I think maybe we see this with other IPOs that the valuation was a little out of whack with the true value, and it looks like with Poshmark there, they actually got them. They had pretty strong growth last year during the pandemic or during the lockdowns and stuff, and now they're slowing down from that. I think for a growing business, these numbers are fine. But I think maybe the growth story doesn't look quite as strong as it might have looked a year ago or when they went public.
Nicholas Rossolillo: I will say this though: The stock price aside, since the IPO early this year, they had pretty impeccable market timing, catching the tail end of that e-commerce boom from last year, and now this year, like the reopening trade, all the clothing companies that benefit from in-person shopping have been where it's at, but Poshmark hit that pretty well. They have a massive amount of cash on the balance sheet right now. The stock has been absolutely clobbered and beat-up, but I like that huge cash balance, well over half a billion in cash and equivalents just sitting there ready to be deployed like with the Suede One acquisition that they recently made.
Deidre Woollard: They announced recently Brand Closets. I think that's interesting, too. They're looking at partnerships the same way that thredUP is looking at partnerships. Although I don't know if they're doing the same clean-up, clean-out thing, I think it's more a question of having brand closets for individual brands. It's a little bit different. It's interesting to me that these are seen as pandemic, be-at-home stocks because I think of them also as the idea that people are going to be interested in going out again and that should be where clothing and accessories should be thriving. I'm wondering if maybe there is sort of this -- people waiting to see how it shakes out to see which company is the winner. But I don't think that there is a winner because I think these all are aimed at different parts of what I believe is going to be a really big market. I feel maybe that we're underestimating the value of the resale market because it's relatively small right now. I think thredUP is probably overstating some of the numbers in that report they did, but not by that much. We all have a lot of clothes and putting them back into the market is a tremendous opportunity.
Nicholas Rossolillo: It obviously benefits all these companies to cite those massive market numbers. But I would point out like at the time that Etsy acquired Depop, they cited some very similar figures as well. Not exactly the same numbers, but they also indicated this is going to be a business, a little segment, a niche, within apparel and accessories. It's going to be tens of billions of dollars every year in incremental spending in the coming year. It's a niche, but it's not a small niche.