By Sam Boughedda
Farfetch Limited (NYSE:FTCH) shares dropped more than 7% Friday after Citi analysts cut the firm's price target on the stock to a Street low $4 per share, reiterating a Sell rating.
Citi updated its forecasts for Farfetch. For the first quarter, they "expect GMV decline (-3%), with easier comps and new contracts expected from Q2."
"We're -2.6pp below consensus on Gross Margin, but in-line on EBITDA (1Q23e: -$33m). For 2023, we forecast GMV just shy of FTCH's $4.9bn target (FY23e: $4.82bn) but EBITDA in-line with 1-3% margin guide (FY23e: 1.2%)," said analysts.
For the full-year 2023, Citi forecasts 19% GMV growth to $4.82 billion for Farfetch, largely from new contract additions.
"We expect Adj. EBITDA of $28m, being a margin of 1.2% (guide: 1-3%) driven by negligible Gross Margin expansion (+40bps YoY) but rather SG&A efficiencies. We expect positive FCFF of $76m (guide: positive), driven by a significant WC inflow despite taking on Reebok inventory," the analysts added.
They explained that Citi remains skeptical about further FPS contract wins with favorable terms for Farfetch, and they are cautious about the risk of an ongoing promotional environment "due to pressure on consumer discretionary spend (in light of recent US/China retail data)."