Shares of healthcare apparel company Figs (FIGS 2.29%) plunged on Thursday after the company reported financial results for the fourth quarter of 2023. As of noon ET, Figs stock was down about 15%. This former market darling is now down 90% from its all-time high in 2021.
A tale of two expectations for Figs
In the previous quarter, Figs' management said it expected full-year 2023 revenue to be down 8.5% from 2022. But Q4 net revenues of $145 million came in better than management's guidance. Full-year net revenues of $546 million were consequently down only 7.9% year over year.
That said, this is one of those cases where Wall Street forecast higher top-line numbers than management guided for. So while Figs outperformed guidance in Q4, it didn't live up to the expectations of the analyst community, leading to the drop in stock price today.
Moreover, Figs' management gave top-line guidance for 2024, saying that it expects its revenue to be modestly down in the coming year. By contrast, Wall Street was looking for top-line growth, adding to today's disappointment.
Figs is in better shape than it seems
Figs' CFO is leaving the company for another job in April. This uncertainty is also hanging over what I'd say was a decent year for the company. Financial results weren't necessarily great, but they seem better than what the market's reaction would lead one to believe.
While Figs' revenue dropped in 2023, and it expects further pullback in 2024, the company's active customers increased 13% year over year in 2023, which is worth noting. Moreover, Figs is in good financial shape: It's profitable, it's debt-free, and it has nearly $250 million in cash, cash equivalents, and short-term investments.
Moreover, after today's drop, Figs stock trades at only about 10 times its free cash flow, which is inexpensive. The company needs to maintain profits and get back to growth. But at this price, this might be a stock to add to your watch list.
