Over the twelve months commencing from 2020 Redbubble Stock moved up a massive 513% significantly outperforming the market. Shares in ASX listed RedBubble seemed to be reaping the benefits of the COVID lockdowns, however, shares are now down over 54% from their highs. We take a look and see has the bubble popped for redbubble stock in 2022?

Redbubble Shares 2022 About

Redbubble operates a leading global marketplace powered by independent artists, allowing the artists to sell designs direct to consumers. The platform boasts over 800,000 artists who have earned more than $100million through sales across ASX:RBL marketplaces.

Redbubble effective take rate
Redbubble take rate: source company media

The model of the store is similar to a dropshipping method, where no inventory is actually held on hand and is instead created on-demand and shipped out only once an order has been fulfilled.

Redbubble Shares 2022 Price

Shares in ASX listed online marketplace Redbubble are down 44% over the past 12 months from a high of $7.35.

The company has a market capitalisation of $905.02 million at current prices and a 52-week range of 2.62 – 7.35 per share. The shares in redbubble are currently trading 24% higher than the 52-week low.

Redbubble does not currently pay a dividend to holders.

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Redbubble Shares Financials

Redbubble released their half-year results for the year ended 2019 to the market back in December. Revenue from activities was at $213.5m for the period, this was a change of 25.1% compared to the prior comparable period.

Topline growth continued to increase into the FY20 with full-year revenues of $416.3million which was a YoY growth rate of 35.6%. The company also reported a loss of $8.8m for the year.

The stock flew upwards over 2020, making investors almost 401% over the period from Jan – December. The reason for this was likely a number of positive business updates and a shift to positive earnings for the period. In the half-year of FY21, the group reported revenues growing at 95.6% with a profit of $41m.

It started to become evident from the FY21 result that the growth rate experienced during the first half of the financial year couldn’t be maintained with group revenues coming in whilst still high however lower than the previous half at $657.3 million and a net profit of $31.2m.

Since the FY21 results, the company has issued a trading update on the 14th of October saying that excluding the sales of ‘masks’ the group’s marketplace revenue for the 1Q was down 6%.

US non-store v store-based retailer YoY growth - Redbubble stock
US non-store v store-based retailer YoY growth

The above seems to show us that potentially there is more bad news in store for the company. The group seems to be unable to maintain the same levels of revenue growth previously experienced during the COVID period. Covid presented a great catalyst for the online shopping businesses, however with the world reopening consumers will have a greater choice once again.

Gross Transaction Value by Product Category, ASX:RBL, Redbubble Stock
Gross Transaction Value by Product Category

As reported in the groups trading update from the 14th of October, the sale of masks contributed a significant portion of the transaction value. Interestingly the only product category that was trending upwards was the T-shirts segment, whilst transaction value was down or flat for other segments.

Redbubble Shares Prophets Take

We believe that whilst Redbubble shares performed extremely well over 2020 we don’t see the group being able to achieve the same levels of top-line growth into the future. The macro-environment favoured companies which had their businesses online due to the lockdowns which were enforced around the world.

Investors have been wary of the stock in the past due to a history of quite volatile reporting results. We believe this will continue with seasonality skewed to the Christmas period. We see Redbubble Stock as being highly seasonal moving forwards unless the group can find a way to move away from the gifting space.

Now that the lockdowns are over, we believe that there will be a shift back to normality with consumers spending their discretionary income on items such as travel and vehicles. We believe we will see a structural shift in the way people live, work and travel over the medium term.

We will be staying away from redbubble stock for the foreseeable future. We have also seen other online retailers such as Kogan follow along a similar trajectory as ASX:RBL recently.

Whilst not an ASX listed company, maybe take a look at our writeup on Airbnb Stock.

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