What To Make Of Poshmark’s First Earnings Report

Shares of Poshmark (NASDAQ: POSH) are going through a baptism of fire right now as they continue to fall from their IPO highs. Having priced their IPO at $42, they followed the current trend in tech by blowing that out of the water on day one. Shares shot above $100 on that first day of trading in the middle of January but unfortunately for Poshmark investors, it’s been downhill since.

It didn’t help that they went live right as the tech market settled into a correction, with interest rates popping and Wall Street moving out of growth names. But they’re public now and are expected to run with the bulls, si there’ll be little to no quarter given just because they’re new.

It’s in that spirit that shares are trading down more than 10% in Friday’s pre-market session, after the social commerce marketplace reported their first earnings since becoming a public company after the close on Thursday. Though non-GAAP EPS was in the black when a minor red print was expected, GAAP EPS was firmly in the red when analysts had expected it to just about be in the black. Revenue was in line with the consensus but not even above $70 million for the quarter. Considering Poshmark is running with a $4 billion market cap, you can understand investors current concerns about it being a little frothy.

Tough First Quarter

Despite shares popping 15% in yesterday’s session, those hopes look set to be dashed and the indications are that Poshmark will be testing its lows shortly. It didn’t help that the forward guidance issued by management was also light, which is definitely not something you want to see from a company that’s just made the huge step of going public.

For all that though, management still struck a positive tone with last night’s report. CEO Manish Chandra spoke optimistically when he said “we reported a strong first quarter as a public company and our third consecutive quarter of operating profitability as our community of buyers and sellers continued to embrace social commerce. During these unprecedented times, we are proud to provide an easy and accessible way for anyone to sell and everyone to thrive on our social marketplace. We will continue to make investments in product, technology, and marketing to grow our business, support our community, and strengthen our social marketplace over the long term.”

The Long Game

There’s a solid argument to be made that once the current volatility in the tech space recedes and a risk-on sentiment returns, investors will be happy to buy back into the growth story and long-term potential that Poshmark offers. There’s a reason it traded more than twice as high as its IPO price on day one and there’s a reason the likes of Cowen, MKM Partners, and William Blair were all out with Buy ratings in the wake of that first-day performance.

MKM in particular viewed “Poshmark as well positioned to grow market share from the accelerated shift to online and super-charged growth of resale, propelled by the pandemic.” They added in their note “while each resale player has unique propositions for buyers and sellers, we find Poshmark’s asset-light model particularly attractive and provides the clearest path to profitability longer-term. We see share gains driven by the opportunity for 30%+ active buyer growth, strong brand recognition, ample sales catalysts, and supported by elevated marketing, which we view as opportunistic.”

There’s a lot here to chew on and considering about 50% off their opening day’s highs, you can’t help but feel there’s a discount to be had. For those thinking about getting involved, it could be an idea to work some orders in the mid $40s and start building a position from there. While it’s been a tough first chapter, this is a story that’s really only just beginning.