What happened
Shares of Poshmark (POSH) were moving higher today after the online used clothing marketplace received a well-timed analyst upgrade from Barclays. The news came just one session after the stock sank when it missed the mark in its second-quarter earnings report last Friday.
As of 3:14 p.m .ET, the stock was up 17.7%.
So what
Barclays analyst Trevor Young raised his rating from equal weight to overweight, noting positive signs in the company's recent earnings report. He argued that its growing base of active buyers has reached a tipping point for the platform. Young also cited high engagement from social elements of the platform, secular tailwinds, and a benefit from consumers trading down during a possible recession. Young raised his price target on the stock from $13 to $17.
Poshmark probably wouldn't have jumped double digits on an ordinary upgrade, but this one came immediately after the stock fell 8.4% on Friday on earnings. The Barclays upgrade seemed to cause investors to rethink the quarterly results.
In a tough quarter for e-commerce stocks, Poshmark reported revenue growth of 9% to $89.1 million ahead of estimates at $87.4 million and coming after it delivered 22% top-line growth in the quarter a year ago.
Active buyers rose 14% to 8 million, but adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) flipped from a $6.5 million profit in the quarter a year ago to a $9.8 million loss, showing the company is having trouble monetizing its user growth. Guidance for the third quarter was also weak, calling for a sequential decline in revenue to $85 million to $87 million and an adjusted EBITDA loss of $9 million to $11 million.
Now what
While Poshmark is adding new features to make buying and selling on its platform easier, the company competes against a slew of discount first-hand online retailers and second-hand options like Etsy's Depop.
Additionally, single-digit revenue growth and an EBITDA loss aren't particularly encouraging, especially with Poshmark's weak guidance. Though analysts expect revenue growth to reaccelerate next year, it will take more than that for the stock to make a full recovery as it's still down sharply from its initial public offering (IPO) last year.
