The Redbubble (ASX:RBL) share price is up over 400% in 2020: Can it go even higher?

The Redbubble Ltd (ASX:RBL) share price is up 410% in 2020. Can it keep going higher from here? One leading broker thinks it can…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Redbubble Ltd (ASX: RBL) share price has been an incredible performer in 2020.

Since the start of the year, the ecommerce company's shares have risen an incredible 410% from $1.10 to $5.62.

This has been driven by the accelerating shift to online shopping during the pandemic, which has underpinned Redbubble's explosive sales and profit growth.

Can the Redbubble share price go higher?

One leading broker that believes the Redbubble share price can go higher from here is Goldman Sachs.

According to a note out of the investment bank, following the release of its strong first quarter update, its analysts have retained their buy rating and lifted their price target to $6.25.

This price target implies potential upside of 11% for its shares over the next 12 months.

Why is Goldman bullish on Redbubble?

Goldman Sachs was impressed with its performance in the first quarter. Especially given how its growth is no longer being underpinned predominantly by face mask sales.

The broker commented: "Marketplace revenue was in line with GSe but strong gross margins were the positive surprise. RBL delivered 116% marketplace revenue growth in 1Q21 despite face mask revenue reducing as a percentage of total revenue through the quarter (27% in July to 14% in September)."

Its analysts believe this "implies a broadening contribution to growth across a range of categories, noting that Homewares, Artwork and Accessories all grew by >100% yoy in the quarter."

What else did Goldman Sachs say?

The broker notes that the broadening of its product range is a big positive, as it increases the company's total addressable market.

It also sees potential for greater repeat usage and operating leverage to boost its profitability.

Its analysts explained: "We remain Buy rated on RBL driven by: (1) expansion of its TAM through continued broadening of its product categories, (2) potential growth from increasing repeat usage on its platform (still relatively low at <1.5x p.a.), (3) further operating leverage as we expect RBL to manage cost growth well below revenue growth over our forecast period (we forecast opex to grow at a 7% CAGR FY20-FY23E vs. a marketplace revenue CAGR of 18% driving EBIT margins from 1.2% in FY20 to 11.3% in FY23E and an EBIT CAGR of 151%)."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

A young man sits at his desk working on his laptop with a big smile on his face.
Growth Shares

1 of the best ASX growth stocks to consider buying in July

I’m calling this stock one of the leading growth opportunities.

Read more »

a group of tech people gather around a computer operated by a young woman while the group looks on in support.
Growth Shares

3 of the best Australian stocks to buy and hold forever

These high-quality shares are rated as buys by brokers for a reason.

Read more »

$100 Australian notes on top of each other.
Growth Shares

Where to invest $10,000 into ASX shares in July

Analysts are raving about these shares. But why are they buys?

Read more »

Four piles of coins, each getting higher, with trees on them.
Growth Shares

2 ASX growth shares to buy this month: experts

These stocks are expected to have a strong next few years…

Read more »

Concept image of a businessman riding a bull on an upwards arrow.
Growth Shares

3 ASX growth shares to buy before the next bull market

These shares could fare well in the next bull market. Here's what analysts are tipping as buys.

Read more »

Two university students in the library, one in a wheelchair, log in for the first time with the help of a lecturer.
Growth Shares

3 no-brainer ASX shares to buy with $200 right now

You don't need a brain to see that these shares could be top picks right now.

Read more »

A man with a wide, eager smile on his face holds up three fingers.
Growth Shares

3 ASX growth stocks worth buying with $7,000 in your portfolio today

These stocks are all historic market beaters.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Growth Shares

3 ASX 200 shares with huge growth potential in the next decade

Analysts think these growth shares could be in the buy zone in July.

Read more »