Temple & Webster shares tumble as UBS flags ‘extreme’ valuation
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The news: Shares in Temple & Webster fell sharply in afternoon trade, reversing big gains on Thursday after it announced a five fold full-year profit increase, as UBS analysts described the online furniture retailer’s valuation as “extreme”.
The numbers: At 12:34pm AEST, shares in Temple & Webster had dropped 9.2% to $25.7. They had closed 8.3% higher on Thursday after the release of the company’s full-year earnings result.
The context: UBS analysts said that “accelerating top-line growth ahead of an anticipated improving macro backdrop (rate cuts, stronger housing etc.) has driven a further re-rate on already very lofty expectations”.
Although they said that “valuation is extreme”, they find it “difficult to identify a potential negative catalyst to disrupt TPW’s top-line momentum at this point”.
They added that the “picture continues to impress” but at a roughly 38x price to earnings ratio estimated for FY30 “and already optimistic medium-term earnings leverage expectations, we cannot justify the current multiple and retain our ‘sell’ rating despite management execution and the current strong momentum”.
The source: UBS research
