Redbubble (ASX:RBL) share price sinks again after brokers respond to update

Redbubble's shares are under pressure again on Wednesday…

| More on:
A woman frowns and crosses her arms.

Image source: Getty Images

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 is under pressure again on Wednesday.

In afternoon trade, the ecommerce company's shares are down almost 9% to a 52-week low of $2.12.

This means the Redbubble share price is now down 30% in the space of two days.

Why is the Redbubble share price sinking?

The weakness in the Redbubble share price this week has been driven by the release of a very disappointing first half trading update on Tuesday.

The heavily shorted company revealed that its first half gross transaction value (GTV) was down 14% over the prior corresponding period to $381 million. Things were even worse for its earnings, with its EBITDA crashing 84% to just $8 million.

Management advised that this was driven by strong competition in the second quarter which impacted organic demand and led to increasing paid acquisition costs.

Unfortunately, a quick fix is not expected, which led to Redbubble downgrading its full year guidance. It now expects its marketplace revenue to be lower year on year and for its EBITDA to marketplace revenue margin to be negative.

Broker response

This update didn't go down well with brokers and has led to significant downgrades to estimates.

One broker that was particularly disappointed was Morgan Stanley. This morning the broker downgraded Redbubble's shares to an equal-weight rating and took an axe to its price target. The latter has been cut by a whopping 59% from $6.50 to just $2.65.

Another broker that is more positive is Morgans. Its analysts have retained their add rating but cut their price target by 26% to $3.59. While this still implies decent upside, it hasn't been enough to convince investors to buy shares today.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

group of friends checking facebook on their smartphones
Broker Notes

Macquarie tips 22% return for this ASX telco stock

This telco could be undervalued at current levels according to the broker.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.
Broker Notes

Passive income: What's CBA's dividend outlook according to Macquarie?

Is CBA still a top passive income stock?

Read more »

A smiling woman looks at her phone as she walks with her suitcase inside an airport.
Broker Notes

Down 41% in a year, why Macquarie thinks Flight Centre shares are set to rebound

Is Flight Centre about to take off?

Read more »

A group of miners in hard hats sitting in a mine chatting on a break as ASX coal shares perform well today
Broker Notes

Does Macquarie rate Liontown Resources shares a buy, hold or sell?

Let’s find out what the broker had to say.

Read more »

Machinery at a mine site.
Broker Notes

Up 48% this year, does Macquarie think Lynas Rare Earths has further to run?

Changing market dynamics.

Read more »

A couple cheers as they sit on their lounge looking at their laptop and reading about the rising Redbubble share price
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

two men smiling with a laptop in front of them, symbolising a rising share price.
Broker Notes

These ASX 200 shares could rise 25% to 60%

Analysts think these shares are top buys and could rise materially.

Read more »