The Kogan.com Ltd (ASX: KGN) share price has surged close to 60% higher so far this month in response to a positive update on the Australian online retailer's March quarter performance.
This was good news for longer-term shareholders as it meant Kogan's share price crossed the $5 mark for the first time since October last year. When the market closed on Friday afternoon, Kogan's shares had pushed well beyond that and were valued at $5.68.
In the unaudited quarterly announcement to the market, dated April 18, Kogan reported strong growth across the board. Revenue was up 9.5% versus the prior year's March quarter, gross profit increased by 28.4% and EBITDA had skyrocketed 96.4%. Active customer numbers were up 23.4% to 1,589,000 as at 31 March 2019, with the largest percentage increases in active customers coming from newer branches of its business like Kogan Mobile and Kogan Internet. The March quarter also saw the launch of its energy price comparison tool, Kogan Energy Compare.
Does this mean it's time to buy Kogan shares?
Honestly, it's really difficult to say whether an investment in Kogan is a good idea. And that's coming from a shareholder!
As far as retail shares go, Kogan is leading the pack. Year-to-date, its share price has well and truly outperformed those of key competitors like JB Hi-Fi Limited (ASX: JBH), Super Retail Group Limited (ASX: SUL) and Premier Investments Limited (ASX: PMV). But Kogan's share price is also still incredibly volatile, which makes predicting where it will go from here particularly difficult.
My personal opinion, gleaned from watching Kogan's share price performance over the last few years, is that the market expects Kogan to fail, and is always overly surprised when it doesn't. When Amazon announced it would be launching its Australian operations towards the end of 2017, many media analysts forecast it would be the end for online retailers like Kogan – they would surely be squeezed out by the incursion of this international behemoth. But Kogan kept on growing, and its share price surged to new all-time highs.
Last August, when Kogan announced it had doubled its earnings for the third year running, the market was again caught off-guard and Kogan's shares skyrocketed 50% higher in under a month. A similar thing happened in January of this year when, contrary to expectations, Kogan announced it had generated record sales over the Christmas trading period.
To some degree, the market's reluctance to get fully behind Kogan is pretty understandable. It often seems like the company strategy is to just think of a product or service, whack the word "Kogan" at the front of it, and start selling it. From a company that started as one guy selling TVs out of his garage, you can now buy a whole range of home appliances, as well as mobile and internet services, travel packages, and even pet insurance. With this sort of rapid expansion in product and service offerings, many analysts and investors might be left wondering whether the company has the skill, experience or knowledge to actually market or sell any of this stuff.
Your opinion on this last point is probably what's going to guide your decision on whether or not you think Kogan is a worthwhile investment. The market seems to think Kogan will have to trip over itself sooner or later; that this rate of growth and product diversification simply isn't sustainable. But so far, Kogan has managed to consistently beat expectations.
Personally, I'm happy to be along for the ride right now, but I'm under no illusions that Kogan is still the market darling it was a couple of years ago. I think that the sort of share price volatility witnessed over the last 12 months is probably the new norm. However, as long as Kogan still has the ability to consistently surprise the market it remains an interesting company that can add some needed excitement to your portfolio.
