The Redbubble Ltd (ASX: RBL) share price cratered to 52-week lows on Thursday morning after the company released its FY21 results.
Shares in the online marketplace slid 14.38% to $2.62 within the first five minutes of trade. But if an investor had the courage to buy the dip, that position is now up by 40%.
The Redbubble share price has staged a V-shape recovery, lifting 40% from today's $2.62 lows to $3.67 at the time of writing. Or nearly 20% higher than Wednesday's closing price of $3.06.
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Why the Redbubble share price tumbled on open
At face value, Redbubble delivered a well-rounded result, with highlights including:
- Marketplace revenue of $533 million, up 58% on FY20
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $53 million, up 930%
- Net profit after tax of $31 million compared to a loss of $9 million in FY20
The Redbubble share price might have sold off sharply this morning due to the company's FY22 forecasts which flagged:
1H FY22 marketplace revenue growth will likely be negative year-on-year (YoY) as the business cycles a particularly strong prior period (due to COVID and including masks, 1H FY21 saw 96% growth and 105% on a constant currency basis).
From 2H FY22, Redbubble expects a steady return to YoY growth rates consistent with meeting its medium term aspirations.
In addition, Redbubble flagged that its EBITDA margin as a percentage of marketplace revenue is expected to be in the mid-single-digit range for FY22.
To further drive growth, the company was going to focus on investing in key aspects of the customer experience, both digital and physical, which would have an impact on gross margin, marketing spend, and operating expenses.
Buyers step up
Sustained buying activity saw the Redbubble share price come back to break even within the first hour of trade before rallying higher into the afternoon.
At the time of writing, more than 11.36 million shares have traded hands, compared to its 10-day average of 3.16 million shares.
Despite an anticipated weaker 1H FY22, the company delivered a record FY21 financial result and an encouraging step towards profitability.
The net profit of $31 million would give the $840 million company a price-to-earnings (P/E) ratio of approximately 27. That's a similar valuation to e-commerce peer Kogan.com Ltd (ASX: KGN), which trades at a P/E of approximately 28.7.
Redbubble CEO Michael Ilczynski looked past the near-term volatility in earnings to say:
We remain focused on the tremendous opportunity we have as a business, and on our medium term aspirations to grow GTV [gross transaction value] to more than $1.5 billion, to grow artist revenue to $250 million, and to produce marketplace revenue of $1.25 billion per annum.
Redbubble share price still in deep red in 2021
Despite a strong reversal on Thursday, the Redbubble share price is still down 38% year-to-date.
Its underperformance was primarily driven by a 23% selloff on 22 April following a third-quarter and year-to-date update.
This update flagged similar challenges to today's full-year results, citing weaker margins due to higher marketing expenditure and operating expenses.
