Brokers split on Cettire despite surge in sales this year
Ms Ratnapala had downgraded Cettire from “buy” to “hold” at the end of March, triggering a 16 per cent slide in the company’s share price. Cettire’s market capitalisation has been under pressure since The Australian Financial Review raised questions about whether it was paying appropriate duties in Australia and the US, its largest markets.
“Cettire is down about 22 per cent from its recent peak and at the current share price, we see risk-reward to the upside for the name,” Ms Ratnapala said after the market update.
Barrenjoey Capital Partners’ Aryan Norozi said concerns about Cettire’s margin issues were “overblown”, increasing his forecast for the share price from $4.40 to $4.50.
“We remain overweight with the view that as Cettire continues to profitably win share, it will increase the market’s confidence in a ‘profitable Farfetch’ scenario,” he said. That was a reference to the Paris-headquartered luxury retailer, once valued at $US24 billion ($37 billion), which was acquired in December as it teetered close to administration.
Its fire sale to a Korean conglomerate has been just one in a string of poor results for similar businesses – like British competitor Matchesfashion, which was sold in the same month and shortly later collapsed into administration – which have investors sceptical about whether Cettire can pull off long-term growth. But Cettire operates a capital-light business with almost no employees and no inventory.
At E&P Capital, analysts led by Julian Mulcahy described the update last week – of $191 million in sales for the period – as “a strong result”. With full-year revenue forecasts lifted by 3 per cent, the brokers kept their $6.11 price target and “buy” rating on the stock.
“Overall, a strong result and confirms the story remains intact, and the negative press is largely noise,” the analysts wrote. “Access to inventory continues to increase, so the only brake is how quickly new customers can be added.”
Like Bell Potter’s Ms Ratnapala, RBC Capital’s Wei-Weng Chen cut his price target on Cettire, reducing it from $4 to $3.80. Mr Chen told clients that he had lowered margin forecast and described the metric as “weak” compared to expectations.
This, he said, was largely driven by an increase in marketing costs which Cettire said was in the “low-double digits” as a percentage of revenue in the third quarter.
RBC is the sole broker without a “buy” recommendation following Bell Potter’s upgrade.
