Why is the Kogan share price rocketing 32% higher today?

A young woman holds her hand to her mouth in surprise as she reads about the Appen share price rising by almost 5% today

A young woman holds her hand to her mouth in surprise as she reads about the Appen share price rising by almost 5% today

The Kogan.com Ltd (ASX: KGN) share price has burst out of the gates on Thursday morning.

In early trade, the struggling ecommerce company’s shares are up a massive 32% to $4.12.

Why is the Kogan share price rocketing higher?

As well as getting a boost from a booming tech sector, the release of a business update appears to have got investors excited and short sellers panicking.

According to the release, for the 12 months ended 30 June, Kogan expected to report total gross sales of $1,180 million and gross profit of $184.6 million. This represents a 0.1% increase and a 9.4% decline year on year, respectively.

In addition, the company revealed that it expects to report an adjusted EBITDA of $19.1 million for FY 2022. Given the struggles it has had with margins this year, this appears to have come as a big surprise to the market. Particularly given how it reported negative adjusted EBITDA for the third quarter.

Another positive is a decent reduction in the company’s inventories. They have reduced from $193.9 million at the end of March to $161.1 million at the end of FY 2022.

Though, one slight negative that investors appear willing to overlook is that Kogan’s active customer numbers appear to have peaked, at least for the time being. After reporting 4,099,000 active customers at the end of March, Kogan finished the period with 3,972,000 active customers.

Why such a big gain for its shares?

The market has been very pessimistic on Kogan’s performance for some time. Particularly given management’s disastrous inventory mis-management and rising competition from Amazon.

This has led to the company becoming a firm favourite with short sellers. So much so, at the last count, 8.2% of Kogan’s shares were held short.

And while today’s result was not great on paper, it wasn’t as a bad as the market was expecting. It could also be a sign that the company is finally turning a corner.

In light of this, those short sellers may be in a hurry to close positions today, adding to the buying pressure and creating a short squeeze.

Management commentary

Kogan’s founder and CEO, Ruslan Kogan, believes that the company is well-placed in the current environment thanks to its value offering. He said:

Times are changing. In uncertain times, people don’t want to alter their lifestyle but they are happy to shift the way they shop. We know that in an environment where great value becomes even more important, Kogan.com serves an important need.

We are making the Business leaner to enable us to pass on cost efficiencies to customers in the form of lower prices. A leaner company means we discontinue parts of the Business that are not delivering value to customers or shareholders, and also gives us the flexibility to respond to significant ongoing changes in the macro environment.

The post Why is the Kogan share price rocketing 32% higher today? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Kogan.com Ltd right now?

Before you consider Kogan.com Ltd, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Kogan.com Ltd wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

See The 5 Stocks
*Returns as of July 7 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

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 positions in and has recommended Kogan.com ltd. The Motley Fool Australia has positions in and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/QGOaLdc

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s