The Kogan.com Ltd (ASX: KGN) share price has fallen heavily over the past four weeks. It's down 15% in a short amount of time.
But, it's also down by around a third over the last year and it has sunk over 80% since October 2020.
It's even down approximately 55% in the past five years.
What's going wrong?
The company's latest report, which was the half-year result for the six months to 31 December 2022, showed a 32.5% decrease in gross sales to $471.1 million. Kogan explained it was cycling against COVID-19-related lockdown orders, and that it was seeing subdued sales for the company.
Gross profit decreased by 41.8% to $62.9 million. The e-commerce ASX share said that the period was impacted by the "substantial right-sizing of inventory involving unprecedented discounting."
However, Kogan did note that operational costs reduced after this reduction of inventory.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was negative $4.4 million, while actual EBITDA was a loss of $23 million. Losses at the EBITDA level haven't been good news for the Kogan share price.
The adjusted net loss after tax was $9.6 million, while the statutory net loss after tax was $23.8 million.
But, just to provide a bit more detail, the New Zealand business called Mighty Ape managed to achieve adjusted EBITDA of $6.8 million, while the adjusted net profit was $4.1 million.
But, there was some positive growth – Kogan First saw subscribers rise by 47.6% to 404,000 and Kogan First revenue went up by 83.1% to $10.8 million.
It also revealed that it bought luxury furniture retailer Brosa out of administration for $1.5 million, which comes with 500,000 Brosa subscribers.
Is the Kogan share price a buy?
It's a tricky question because the business has seen a complete collapse in profitability from pre-COVID and early COVID times.
Kogan said that it made a monthly adjusted EBITDA profit for the first in January 2023 since July 2022.
Now Kogan just needs to put a number of monthly profits together and then the business will have made a profit for a half-year period, which would be very positive for regaining investor confidence.
I think Kogan showed in pre-COVID times that it could make a profit on a much smaller base than the numbers it was producing in FY21 and FY22.
With the inventory (finally?) right sized, the business can focus on making profitable sales.
According to Commsec, the current Kogan share price is valued at 37 times FY25's estimated earnings, which is based on potential earnings per share (EPS) of 10 cents.
So, a full recovery of normalised profit isn't expected for a while, but a return to making a statutory net profit would be a good first step in FY24.
I think more shoppers will buy things online over time, so I do think Kogan has a positive future. But I also think it's important not to anchor to the past Kogan share price heights or profit expecting that it'll get back there quickly. I'd call the Kogan share price a buy at under $4.