The Temple & Webster Group Ltd (ASX: TPW) share price tanked more than 9% today. After rallying an astounding ~350% from its lows in late March, today’s price action could indicate that the company’s share price may have peaked in the short term.
Temple & Webster changes share-trading policy
An article in yesterday’s Australian Financial Review has heightened attention on Temple & Webster’s share-trading policy. The article cited a recent announcement from Temple & Webster, in which the company informed the market that it has amended its policy.
According to the article, the only amendments made by Temple & Webster related to how company directors and key management could trade shares during blackout periods. The company’s old policy included blackout periods of 30 June and 31 December, up until the company releases its preliminary final report or half-year report respectively.
The amendments made to the Temple & Webster policy yesterday now mean the blackout would only be in place up to the results day or the company’s release of unaudited results. Although the article doesn’t suggest market sell-downs are guaranteed, it does raise concerns following similar rule changes by Afterpay Ltd (ASX: APT). Changes made to Afterpay’s policy preceded the selling down of $250 million of shares by the company founders the following day.
Therefore, since there has been no direct, price-sensitive news released by Temple & Webster, the rule change could possible explain today’s price action.
How has Temple & Webster performed during the pandemic?
Temple & Webster is Australia’s largest online retailer of furniture and homewares, boasting more than 150,000 products for sale. Online retailers like Temple & Webster have been one of the few winners during the coronavirus pandemic as shoppers opted to switch to online retail avenues.
Temple & Webster acknowledged this strong demand in a recent trading update, which highlighted a 130% surge in gross sales to 28 June on a year-on-year basis. In mid-June, the online retailer reported a 668% increase in year-to-date EBITDA of $7.1 million. Additionally, the company reported a 68% increase in year-to-date revenue of $151.7 million.
Despite being debt-free and boasting around $30 million in cash, Temple & Webster recently completed a $40 million share placement. The company noted that this will allow for further investments in growth and will improve its technology, product and service offerings.
Should you buy?
In my opinion, the coronavirus pandemic has irreversibly changed consumer behaviour and fast-tracked the move from traditional retail to online avenues.
As a result, I think that online retailers like Temple & Webster could thrive in 2020 and beyond. Despite this optimism, it’s also important to note the astounding run the company’s share price has just had.
From a risk-management perspective, I think a prudent strategy would be to wait until the August reporting season or hold off for an extended pullback before buying shares in Temple & Webster.
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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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