POSH Stock: Why Poshmark is undervalued

POSH Stock: Why Poshmark is undervalued

Founded in 2011, the Poshmark (POSH) online marketplace for secondhand clothes, shoes and accessories is akin to eBay and Etsy. Poshmark connects buyers with sellers, who often list items from their own closet. And it makes money by taking a cut of every transaction.

Poshmark went public on January 14, 2021, at a price of $42, but when shares opened for trading the stock reached $104.98. Since then the stock price has fallen to more reasonable prices and is currently trading at about $46.

The company owns and operates a social marketplace. This platform is used to buy and sell lifestyle products in the U.S. and Canada (and it is currently expanding to Australia). POSH sells apparel, footwear, beauty, and home products as well as accessories and jewelry.

As POSH is a social marketplace the company encourages repeat purchases ensuring a high customer engagement rate. It ended the September quarter with more than 31.7 million active users, 6.2 million active buyers, and 4.5 million active sellers.

POSH claims active users spent 27 minutes on average each day on its platform in 2019 which resulted in 20.5 billion social interactions. While the company’s sales rose 38% year over year in 2019 to $205 million, its net loss widened by 236% to $49 million.

In the first three quarters of 2020, sales were up 28% at $193 million. Further, the company was also able to turn profitable and reported $21 million in net income. For the last quarter ended Dec. 31, Poshmark’s loss narrowed to $4.06 million, or 31 cents per share, from a loss of $14.75 million, or $1.20 per share, a year earlier. After adjusting for one-time items, the company earned 5 cents a share during the quarter.

Revenue climbed 27% to $69.32 million from $54.74 million a year earlier. That was higher than the average revenue estimate of $68 million, reported by Refinitiv.

For the first quarter of 2021, Poshmark is calling for revenue to fall within a range of $75.5 million to $77.5 million. Analysts had been calling for $79.2 million on average.

Consumers, especially younger ones, are increasingly turning to these types of internet marketplaces for secondhand goods. A number of players are looking to gain market share, including luxury consignment site TheRealReal, sneaker reseller StockX and virtual thrift store ThredUp. The latter filed for its IPO earlier this month.

Poshmark said its count of active buyers reached 6.5 million in the fourth quarter, up 20% year over year. The company defines active buyers as unique users who have purchased at least one item on the platform in the trailing 12 months, regardless of returns and cancellations.

Cowen & Co. has previously estimated that the resale market in the U.S. is valued at $30 billion to $35 billion.