In our view, Allbirds is not worth anywhere near $2 billion, a valuation that implies Allbird’s revenue will grow over five times current levels, and that the company will become more profitable than all of its competitors, which is all highly unlikely.
We think the stock might be worth as little as $119 million, as it faces steep competition from established companies such as Nike (NKE), Adidas (ADDYY), and Tommy Hilfiger, among others.
While Allbirds is a brand known for its sustainability and eco-friendly operations, Allbirds is struggling to scale its business as revenue from new customers declined year-over-year in 2020 and the company hasn’t ever been profitable. Allbirds losses will only get worse as it heavily invests in a costly brick-and-mortar strategy to complement its digital strategy.
Also, ESG investors shouldn’t overlook Allbirds’ poor corporate governance.
Allbirds Is Not Profitable
Allbirds admits in its S-1, “We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future.”
Figure 1: Allbird’s Revenue & Core Earnings: 2019-2020
Sources: New Constructs, LLC and company filings
Top-Line Growth Is Decelerating
Allbirds’ digital sales growth, while above U.S. online shoe sales growth, is slowing quickly. The firm’s digital sales grew 42% YoY in 2019, but just 21% in 2020. The firm’s total YoY revenue growth fell from 54% in 2019 to just 13% in 2020. For reference, the more mature, casual footwear maker Crocs’ (CROX) revenue also grew 13% YoY in 2020. More concerning for a firm seeking to take market share, Allbirds is having difficulty drawing new customers to its brand. Sales from new customers fell from $105 million in 2019 to $103 million in 2020.
This article originally published on September 23, 2021.
Disclosure: David Trainer, Kyle Guske II, Alex Sword, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.
Disclosure: New Constructs
David Trainer, Kyle Guske II, Sam McBride, Matt Shuler, Alex Sword, and Andrew Gallagher receive no compensation to write about any specific stock, style, or theme.
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