Poshmark POSH 15.77% may not have had the fashionable start its investors had hoped for. It still seems like a keeper.
The social e-commerce platform reported fourth-quarter results on Thursday—its first as a public company—that looked largely as expected. Disappointing guidance for the first quarter, however, had investors opting for a reposh. Shares fell 13% in after-hours trading following a 16% rise during a session that was strong across the technology sector.
Poshmark’s value has taken a significant haircut since its shares opened 124% above their public offering price in mid-January. Even before the after-hours selloff, its shares are down 41% from its first-day closing price, giving them a multiple of enterprise value to revenue comparable to that of pandemic darling Etsy. ETSY 7.24% To choose Poshmark over Etsy at these levels, you have to believe that the gangbusters growth that the latter put up last year will ease with the pandemic and that Poshmark is just getting started.
Even considering Poshmark’s underwhelming guidance, that could prove a solid bet. Poshmark’s forecast implies it still should see sequential growth in the first quarter, even though its fourth quarter is seasonally its strongest. Furthermore, the company said it had experienced an unseasonably strong January before inclement weather led to underperformance in February in some states.
While Etsy forecasts first-quarter revenue more than double that of a year earlier, it also said it expects growth to decelerate later this year as the comparisons get more difficult. Wall Street expects a second-quarter pace of just 14%—less than the 20% it expects from Poshmark.
As e-commerce businesses that stand to benefit long-term from the pandemic-accelerated shift online, Poshmark and Etsy have a lot in common. Neither holds inventory, for example, allowing them to pivot in nimble ways to push different categories as trends have changed.
But their differences are key in determining which stock is preferable. Etsy said in its fourth-quarter investor presentation that 41% of its gross merchandise sales came internationally. Poshmark, while is already 10 years old, began to expand outside the U.S. only two years ago, when it launched in Canada.
Analysts seem cautiously optimistic about Poshmark’s ability to grow internationally, but they believe it will take time. The early results from Canada at least provide a positive indication: Poshmark said it attracted more than 1.4 million users there in its first year of operations, with gross merchandise value in Canada growing from $6.4 million in 2019 to $32.6 million for just the first nine months of 2020. It also said Thursday that it launched in Australia last month, underscoring international expansion as a priority.
Another key difference lies in branding. Thanks in part to the broad interest that the pandemic brought to Etsy’s platform, the company has come a long way from its days as a niche site dedicated to crafting. But as a newer platform that has long pushed a social-networking angle, Poshmark has been able to brand itself as decidedly more hip from the start without having to reinvent itself. In its S-1, Poshmark noted that 80% of its users are millennials or Generation Z. And in 2019, the company brought on Serena Williams as a board member—a fact that was not so casually dropped during its conference call on Wednesday.
Poshmark didn’t have the breakout year that Etsy did in 2020, but fashion-forward investors might want to put their money on what is trending.
Write to Laura Forman at [email protected]
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