Why Cettire rallied as much as 40% today then gave back its gains
Cettire shares rallied as much as 40% as the market opened. But those gains have now halved.
Source: iStock
Mentioned
KEY POINTS
- Cettire's volatile stock history showcases remarkable swings, including a 90% fall and a subsequent 900% rally
- First-half FY24 results reveal significant growth and a strong outlook
- Despite impressive performance, insider selling trends and valuation concerns raise doubts about the sustainability of its current share price surge
Cettire (ASX: CTT) – It's one of those stocks that can just about do anything. Its share price fell more than 90% between November 2021 and May 2022, it rallied almost 900% between June 2022 and July 2023, and today it was up as much as 40% on the back of its first-half FY24 results.
The results, outlook and earnings call had a lot to unpack. Here are some of my key takeaways as well as an underrated insight about why the stock loves to give back its gains.
Bumper Numbers
The results posted some strong numbers. The below compares 1H24 figures against the prior corresponding period.
Gross revenue of $460.5 million, up 89.7%
Average order value of $791, up 4.0%
EBITDA margin of 7.4%, down 1.5 percentage points
Net profit of $12.8 million, up 60%
Active customers of 576,000, up 83.4%
Adjusted net profit was $16.4 million or 14.7% ahead of Factset consensus expectations. So a sizeable beat.
Outlook and Earnings Call
January gross revenue was tracking 80% higher year-on-year and the business remained profitable at the adjusted EBITDA level.
"In 2H24, Cettire will continue to focus on maximising profitable revenue growth, whilst also self-funding," the company said in a statement.
The earnings Q&A contained some interesting nuggets, including:
China launch imminent with multiple channels into the market including an indirect channel and a relationship with JD.Com
US market continues to perform strongly with high customer retention rates and strong growth across the business in January
Growth rate of active customers accelerated due to significant improvement in 12-month retention rate; driven by improving product and customer experience
Share Price Reaction
The combination of strong face value growth numbers, an earnings beat, positive January data and 2H24 momentum resulted in a massive gap up at the open. At the same time, it's hard to justify its $1.2 billion valuation on first-half profits of just $16.4 million.
Open: +30.9% to $4.15
Session high: +39.75% to $4.43 (at 10:04 am AEDT)
Current: +22.6% to $3.89 (at 12:50 pm AEDT)
From session high to current: -12.2%
Cettire intraday chart for Wednesday, 7 February 2024 (Source: TradingView)
Cettire Insiders
Cettire insiders are notorious for selling into share price strength.
On 11 August 2023, Cettire's founder Dean Mintz sold $100 million worth of shares, riding the 12% rally after a solid full-year result.
Date | Director | Type | Amount | Price | Value | Notes |
|---|---|---|---|---|---|---|
05/09/23 | Sell | +5,000 | $3.20 | ($16,000) | On-market trade | |
18/08/23 | Sell | +1,000,000 | $3.10 | ($3,097,600) | On-market trade | |
14/08/23 | Sell | +10,000 | $3.20 | ($32,002) | On-market trade | |
14/08/23 | Sell | +400,000 | $3.20 | ($1,280,080) | On-market trade | |
11/08/23 | Sell | +33,333,334 | $3.00 | ($100,000,002) | As advised by the company | |
22/11/22 | Sell | +41,095,891 | $1.46 | ($60,000,000) | As advised by the company | |
25/03/22 | Sell | +35,000,000 | $1.35 | ($47,250,000) | As advised by the company | |
02/09/21 | Sell | +200,000 | $2.55 | ($510,000) | On-market trade |
Ironically, a $3.7 million block trade went through around 10:45 am AEDT. We'll have to wait a few days for the potential "Change in substantial holding" announcement.
