Bell Potter downgrades Cettire to 'hold'
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More news: Bell Potter has downgraded its rating on Cettire to ‘hold’ from ‘buy’ as it keeps its price target on the stock at $2.
Cettire’s shares were 16.1% lower at $1.48 at 2:50pm AEDT, as investors continued to sell out of the stock following Tuesday's Q1 results.
Bell Potter analyst Chami Ratnapala said the price target remained unchanged as downgrades were offset by the reduction in the weighted average cost of capital to 11.1% from 12.8%, driven by a fall in the risk-free rate as the broker factored in the upcoming easing cycle.
What they said: “While we remain cautious on the upcoming 2Q promo period, we think CTT will continue to outperform their peer group similar to the current performance of +5% vs the overall luxury industry in decline with the ambition to retain healthy EBITDA margins of ~5%,” Ratnapala said.
“However, at our unchanged price target of $2.00 the total expected return is <15% so we downgrade our recommendation to a hold rating and lift the previous speculative risk rating.”
Cettire shares plunge further on weak Q1 earnings
The news: Cettire shares have extended their losses after plunging on Tuesday on the back of weak September quarter earnings.
The numbers: The luxury e-commerce platform’s shares had plunged 10.45% to $1.58 at 12:57pm AEDT. On Tuesday, the stock plummeted 17.3% and over the last 12 months it has fallen 36.09%.
Bell Potter has a $2 valuation on the company and a ‘buy (speculative)’ rating. However, the broker’s forecasts on Cettire are under review.
On Tuesday, Cettire reported an adjusted EBITDA of $2 million — a 77% decrease from $8.7 million a year earlier.
The context: Bell Potter analysts said they viewed Cettire’s September quarter results as “mixed” but that the company was “navigating tough operating conditions better than Q4”.
The positives included first-quarter revenue growth of 22% and exit an EBITDA margin run-rate of 5%. However, the broker said negatives included the company’s optimisation strategy leading to a slowdown in its topline at the start of Q2.
What they said: “While 2Q is tracking lower on our revenues, we see margins if they can be maintained at 5% as strong and should largely be in line with our EBITDA estimates (absolute $ wise) for 2Q,” Bell Potter analyst Chami Ratnapala said.
“However, we see comps remaining elevated throughout the period ahead at 87% and remain cautious on the 2Q performance.”
The source: Bell Potter research
