What happened
Shares of Allbirds (BIRD 29.31%) were down 6% as of 11:22 a.m. ET on Wednesday after the company reported better-than-expected revenue and earnings for the third quarter. However, management's fourth-quarter revenue guidance was lower than the consensus estimate, which sent the stock down.
Year to date, the stock has fallen 82%. Could this be a buying opportunity?
NASDAQ: BIRD
Key Data Points
So what
The market has had little patience with companies reporting losses in this environment. It doesn't matter that Allbirds posted another quarter of double-digit revenue growth. The company posted a loss of $76 million through the first three quarters of the year, and guidance didn't give investors much confidence that financial results will be better than current estimates.
Nonetheless, it is a good sign that Allbirds posted a faster rate of sales growth than Nike. Allbirds sales clocked in at nearly 16% year over year in the last quarter, which is noticeably better than Nike's most recent quarterly growth rate of 5% in global footwear sales.
Now what
Management sees adjusted net revenue growth between 10% and 14% for the holiday quarter, which looks soft for a typically strong seasonal quarter. It doesn't help the bullish case for the stock that the company expects to report more losses on the bottom line.
The fourth quarter is expected to be impacted by inflation and high promotional activity in retail. During the earnings call, management mentioned these trends are expected to lead to "choppiness" in consumer behavior. Wall Street is taking this as an early warning that fourth-quarter earnings results could be lower than current estimates.
Allbirds stock has fallen to a low price-to-sales multiple of 1.26, but that is still somewhat high for a retail business that isn't profitable. There's not a good reason to buy the stock until the company grows sales faster or provides investors a clear path to profitability.
