What springs to mind when you hear something about Farfetch? Likely, it conjures images of stylish looks with luxury brands like Balenciaga, Burberry, and Prada. Some of these outfits might be more expensive than what you have in your investing portfolio (sorry). Simply put, Farfetch associates with various pricey stuff, so it’s hard to imagine the company's shares could end up being in a penny-stocks list. But guess what? It happened, and we are about to find out why.
Back then, when Farfetch went public in 2018 or at its peak during the pandemic in 2021, the company hardly expected that it might be among low-priced stocks. However, penny stocks may be a source of inspiration, if you know what you're looking for. And that's where stock screener comes in handy. This tool helps you find stocks that match your criteria and gives you a list of assets to dig into further.
This whole not-too-long journey is laid out in the chart below. You can see when Farfetch had its IPO, the moment of fame, and not-so-great present.
And then there's the next chart, which shows the most recent drop – a staggering 45% in just one day.
Farfetch’s Q2 financial report turned out to be worse than expected. Instead of $648 million revenue, the luxury fashion giant reported only $572 million, which is 12% lower than estimates.
To make things worse, Farfetch admitted that the total value of orders on the Farfetch platform is unlikely to meet the expectations. The full-year forecast was consequently revised downward, dwindling from $4.9 billion to $4.4 billion.
Why are the numbers so disappointing? Well, among the reasons is the fact that sales haven't bounced back as much as they hoped and less-than-expected demand in China.
After the report came out, analysts started lowering their target price for Farfetch one by one. Yet, they are not hurrying up to give up on the company's potential in the market. Of course, the sales recovery will take a while, and this might not happen in just the next quarter or two. But this doesn’t mean Farfetch can’t be a good long-term buy, especially at its current lower price.
Let’s check how different analyst companies have adjusted their forecasts. For example, Wedbush went from predicting $5 to $3.5, JPMorgan from $15 to $6, Credit Suisse from $12 to $10, and Citigroup from $4.3 to $3. As you see, target prices decrease, but they are still higher than the current price of $2.71, so…
Ultimately, it's up to you to do your own research and figure out whether Farfetch could be a smart investment right now or not. That’s the only way to find success in the world of markets.
