Australia biggest online beauty retailer, Adore Beauty (ABY) has been one of the most disappointing stocks we’ve owned in the past few years, buying in the IPO at $6.75 and still holding today. Back in 2020, they raised ~$270m giving it a market capitalisation at listing of $635m. The stock rallied initially to hit a $7.42 high, before sliding ever since.
At listing, they were doing $120m in sales and the IPO was priced at a multiple of those sales, which was in line to slightly cheap compared to listed comparables in Temple & Webster (TPW) & Kogan (KGN). The sector has since re-rated aggressively in Australia as well as globally, TPW now trades on 1.4 x sales having been as high at 9x sales, Kogan is on just 0.49x sales having been as high as 4.82x while ABY is on 0.65x having peaked at 3.91x. In other words, the sector has re-rerated aggressively and Adore has not been immune.
ABY is now a micro-cap company with a market capitalisation of just $135m with forecast sales in FY22 of $202m. This is now cheap and our preference is to add to the position when the sentiment towards eCommerce changes.
MM believes ABY is at or near a low around ~$1.35
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