- Online cards seller reiterates 2023 guidance
- Record UK Mother’s Day delivered
- Confident of revenue growth return in 2024
Given headwinds from postal strikes, the post-pandemic return to in-store shopping and a cost-of-living squeeze, investors had feared another guidance cut from Moonpig (MOON), one of the retail sector’s most-shorted stocks.
However, shares in the online greetings cards and gifting platform rallied 18% to 134p after the company not only reiterated its guidance for the year ending 30 April 2023 but also gave an optimistic outlook for full year 2024.
EXHIBITING RESILIENCE
In a brief update, Moonpig insisted trading has been resilient across the second half of the year to date and said it recorded its largest ever week of sales in the UK ahead of Mother’s Day.
As a result, expectations for 2023 annual revenue, which were pruned back in December after orders were impacted by Royal Mail strikes, remain reassuringly unchanged at around £320 million.
And Moonpig is also sticking to its 2023 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) guidance, with consensus calling for 11% year-on-year growth to £83 million.
Strategic investments in technology and data have helped to underpin the profitability of the brand famed for its catchy jingle.
REVENUE GROWTH RETURN
While the online cards and gifts seller remains ‘mindful’ of the tough macroeconomic environment, Moonpig expects revenue to be in growth across the year to April 2024, albeit growth will be weighted towards the second half of the year.
Broker Liberum Capital, which likes Moonpig for its 70% online market share, ‘best-in-class’ 25% to 26% EBITDA margin and free cash flow generation, is forecasting sales of £333 million and adjusted EBITDA of £86.5 million for 2024, both up 5% year-on-year.
Moonpig’s CEO Nickyl Raithatha insisted ‘leading market positions, strong customer retention, high profitability and robust cash generation equip us to navigate all stages of the economic cycle’.
He added: ‘We are excited to return to revenue growth in the year ahead, underpinned by continued investments in our technology, marketing and operational capabilities. As the clear online leader in greetings cards, Moonpig is well positioned to benefit from the long-term structural market shift to online.’
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, pointed out that many people had been quick to write off Moonpig as a Covid winner and a post-pandemic loser, but this latest update proves this theory wrong for the online card seller.
However, there are ‘still reasons to be slightly sceptical’, said Mould, with growth set to be weighted towards the six month period ending 30 April 2024.
‘That emphasises how it is a seasonal business with calendar events such as Christmas, Valentine’s Day and Mother’s Day key sales drivers.
‘Since joining the stock market, Moonpig has been at pains to explain its strategy of generating revenue from a broader base of items and to smooth out its revenue across the year. Gifts were the key to its growth, offering people the convenience of being able to send chocolates, flowers or even facilitating a skydive. That part of its growth plan hasn’t quite worked out as planned.’
Mould continued: ‘Ultimately Moonpig still has a big job to prove that it can deliver on the hype around the stock at the time of its initial public offering (IPO). Namely proving there is structural shift to buying goods online. The recent messages from high street card seller Card Factory (CARD) would suggest there is still life in physical stores so Moonpig needs to work harder to deliver the goods.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Daniel Coatsworth) own shares in AJ Bell.
