The Kogan.com Ltd (ASX: KGN) share price is having a rare off day on Friday and is trading lower this afternoon.
At the time of writing the ecommerce company's shares are down 3% to $14.51.
Why is the Kogan share price tumbling lower?
With no news out of Kogan or any relevant broker notes that I'm aware of, I suspect that today's decline is likely to be down to profit taking.
After all, there have been very few shares performing as strongly on the ASX this year as Kogan.
Prior to today, the Kogan share price was up a whopping 100% since the start of the year and 334% from its March low.
Why is the Kogan share price on fire in 2020?
Investors have been scrambling to buy the company's shares after the pandemic accelerated the shift to online shopping and put a rocket up its sales and profit growth.
During the third quarter Kogan reported a 30% lift in sales and a 23% lift in gross profit. This was driven largely by a 50% jump in sales and gross profit in March following the closure of retail stores nationally.
While this was strong, it soon turned out that Kogan's growth was just warming up.
Its strong form continued into April, with the company growing its sales by more than 100% and its gross profit by more than 150%. The latter was despite the company investing heavily in building its brand and growing its active customers.
Those investments definitely paid off. Kogan grew its active customers by 139,000 during April to 1,948,000 customers.
But it doesn't stop there. Even though retail stores have now opened again, Kogan has continued to deliver rapid sales growth.
At the start of June, quarter to date, the company's sales were up over 100% and its gross profit was up over 130%. In addition to this, its adjusted EBITDA had increased by more than 200% quarter to date and its customer numbers had climbed by a further 126,000 to 2,074,000.
What else has been happening?
The company has taken advantage of its strong share price performance to undertake a $115 million capital raising.
Kogan decided to raise the funds to provide it with the financial flexibility to act quickly on future value accretive opportunities.
These opportunities are ones that it feels broaden its offering, expand its customer base, or enhance its operating model. Much like its acquisition of replica furniture and homewares retailer Matt Blatt for $4.4 million in May.
Is it too late to invest?
While I think the short term gains are gone now, I believe there is still an opportunity to invest with a long term view.
I think Kogan has the potential to grow materially in the future thanks to the shift to online, its strong market position, and expansion/acquisition opportunities.
Overall, I would class it as one of the best buy and hold options on the ASX today.
