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Is this online fashion name a buy?

Its time to talk about an unpopular name within the market. Here is the breakdown on $FTCH otherwise known as Farfetch Limited.

Current Price: $26.67

52/Wk High: $31.88

52/Wk Low: $5.99

Read below for the breakdown!

Farfetch is an online retailer and technology platform operating in the luxury clothing and fashion market. The company connects brands and retailers to customers within the fashion world both through their website and app platform.

Not only is Farfetch a potentially shining star within the fashion retail industry but the company separates itself through its data (AI) systems on the back end of their platforms.

Farfetch uses AI for a machine learning system to connect customers directly to brands and luxury fashion retailers.

Taking a look at the numbers, COVID-19 has created significant earnings setbacks. Unfortunately, $FTCH reported a Q2 loss with an EPS of $-1.29 missing the analyst’s consensus estimate of $-0.35.

On the otherhand, revenue has continued to trend upward with reported Q2 revenues of $365 million, up $4 million since Q1 but down $17 million since Q4 of 2019.

Digging into the balance sheet Q2 continued to see major changes. The last reported (Q2) total debt sat at $610 million, up $317 million since Q1.

On the bright side, Q2 cash and short-term investments increased to $802 million, up $380 million since Q1. Finally, total assets continued to increase and came in at $2.736 billion in Q2.

Although the numbers were mixed, analysts remain extremely bullish on Farfetch. Currently, Farfetch’s mean price target sits at $31.70/share, representing a 17.98% gain.

Furthermore, the high price target sits at a bullish $40.00/share, representing a 48.86% upside while the low price target sits at $20.00/share, representing a -25.57% downside.

Not only are the analysts bullish but the big money is as well. When last reported, institutional ownership stood at 82.69% with top holders include Morgan Stanley Investment Managers, Inc., and Index Ventures SA.

Further breaking down Farfetch holders, there are currently 180 large block holders, and $FTCH is 82.80% owned by Investment Managers.

Taking a look at the technicals, Faarfetch has been in a long term upward trend since its IPO in late 2019.

According to the six-month charts, the MACD sits within a range of 0.2278 down to -0.0800 with a strengthening upward momentum.

Furthermore, the six-month RSI sits at 55.38, neither good nor bad. The six-month CCI also sits at a high 110.53. Farfetch in the past month has also pulled back significantly, sitting roughly 5 points off its highs.

Overall, the technicals are not bad, in recent days Farfetch has rebounded since the market correction weeks ago and is back within its upward trend.

In short, Farfetch ($FTCH) seems to be an excellent long term investment if the economic rebound continues. In the long term (one to two years), I believe a reasonable target is $30.00/share but the short-term will continue to be volatile as will the market.


Disclaimer: This is not direct financial advice, simply opinion based on independent research.

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