A Brighter Future Awaits Patient Poshmark Investors

Daily Trade

Social commerce platform operator Poshmark (NASDAQ:POSH) is a popular destination for shoppers to buy and sell second-hand products, or even hold virtual shopping parties. It’s an interesting business model, and while some folks don’t have POSH stock on their radar, perhaps they ought to.

The logo for Poshmark (POSH) on a smartphone screen.

Source: NYC Russ / Shutterstock.com

After all, as reported earlier this year by InvestorPlace contributor Nick Clarkson, Poshmark claimed to have 70 million registered users and over 200 millions products on sale across the U.S. and Canada.

That’s pretty impressive, you’ve got to admit. Clarkson also mentioned that the POSH initial public offering (IPO) was held on Jan. 13, so this is a fairly new stock for adventurous investors.

Furthermore, Poshmark recently released some positive fiscal data. On the other hand, some traders might not have been impressed with the company’s forward guidance. There’s a lot to unpack here, so let’s begin with some technical analysis.

A Closer Look at POSH Stock

I already mentioned Poshmark’s January IPO, but I didn’t say what happened next. Suffice it to say, the price action got nasty soon after the stock’s debut.

Poshmark’s IPO was priced at $42 per share, and POSH stock began trading at $97.50. So, the beginning was auspicious.

However, the bullish momentum didn’t last very long. By the end of January, the share price had already fallen to $70.

Things only got worse from there. POSH stock broke below $50 and then $40 during the summer of 2021, and settled at $26.21 on Aug. 20.

Clearly, the bulls need to show some signs of life – the sooner, the better. At the very least, they should target a recovery of the $42 IPO price before the end of the year.

But hey, at least there may be a bargain here if you’ve been sitting on the sidelines, or if you’re just discovering POSH stock for the first time today.

Another Strong Quarter

If you only glance at the trajectory of the stock, and ignore Poshmark’s financial progress, you might form a bearish outlook.

Yet, it’s important to look at the big picture when assessing a stock. That picture should include the company’s most recent financial data – and in Poshmark’s case, the data is actually quite good.

“We delivered another strong quarter and our fifth consecutive quarter of operating profitability, despite difficult comparisons, a testament to the strength of our cohorts and our business,” assured Poshmark founder and CEO Manish Chandra regarding his company’s second-quarter 2021 results.

I’m not 100% clear on what “difficult comparisons” the CEO is referring to. However, I will certainly acknowledge that e-commerce is a competitive space for any retailer to operate within.

In any case, there’s no lack of clarity concerning the bullish nature of the quarterly fiscal data.

Top- and Bottom-Line Beats

Specifically, Poshmark reported net revenues of $81.8 million, representing a 22% year-over-year increase.

Moreover, that figure beat Wall Street analysts’ expectation of $80.3 million in quarterly net revenues.

In terms of quarterly earnings, the analysts were preparing for Poshmark to lose 7 cents per share. However, the company exceeded the expectations by posting a net loss of 4 cents per share.

Not only that, but Poshmark recorded quarterly gross merchandise value (GMV) of $449.6 million. That figure signifies a 25% year-over-year improvement.

Still not convinced? No problem: Poshmark also reported reaching 7 million active buyers on a trailing 12-month basis. This marks a 16% increase compared to the 6 million from 2020’s second quarter.

In spite of all the great news, POSH stock declined following the data release. Perhaps, this was due to Poshmark’s guidance for third-quarter revenues of $81 million to $83 million.

The Bottom Line

Some traders might not like Poshmark’s forward revenue guidance.

However, I would encourage them to focus on the company’s outstanding second-quarter results.

Besides, five consecutive quarters of operating profitability is a heck of a track record.

All in all, it won’t be easy for the bulls to stage a recovery in POSH stock. Yet, there’s plenty of room for upside – and the data suggests that a turnaround might be in store, very soon.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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