• Home
  • News
  • Business
  • What the market really thinks about Farfetch

What the market really thinks about Farfetch

By Angela Gonzalez-Rodriguez

loading...

Scroll down to read more

Business |ANALYSIS

New York – Shares of Farfetch Ltd (NYSE:FTCH) have been assigned a consensus recommendation of “Buy” from the fifteen brokerages that are currently covering the company.

MarketBeat.com reports that one research analyst has rated the stock with a sell rating, two have given a hold rating and eleven have issued a buy rating on the company. On a related note, the average twelve-month target price among analysts that have issued ratings on the stock in the last year is 20.95 dollars.

Over the past months, several brokers have weighted on the stock. Zacks Investment Research raised Farfetch from a “sell” rating to a “hold” rating in October, while Oppenheimer decreased their target price on Farfetch from 32 to 25 dollars apiece over the summer. Back then, UBS Group also cut their target price on Farfetch from 18 to 15 dollars and set a “buy” recommendation on the stock.

Farfetch isn’t that popular amongst hedge funds…

Data compiled by Yahoo Finance shows that Farfetch Limited (NYSE:FTCH) was in 22 hedge funds' portfolios at the end of the third quarter of 2019. Noteworthy, the luxury fashion e-tailer has seen a decrease in support from the world's most elite money managers recently: There were 24 hedge funds in Yahoo Finance’s database with positions in Farfetch at the end of the previous quarter. In fact, the financial news portal’s calculations showed that FTCH isn't among the 30 most popular stocks among hedge funds.

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, which implies an 8 percent decrease from the second quarter of 2019. Furthermore, a year ago, 28 hedge funds held shares or bullish call options in FTCH.

…But some analysts think Farfetch might be a good stock to invest in case recession hits

The market agrees luxury fashion isn’t normally the sort of business that thrives in recession, which would explain to a certain extent why Farfetch’s stock has been down 66 percent since its initial public offering. In contrast, the luxury e-commerce platform’s revenue growth has been stellar at nearly 90 percent over the past year, recall ‘The Motley Foo’ in an analysis from earlier in December. “While the company is still scaling to profitability, it has a highly attractive business model. As a virtual fashion platform, Farfetch carries very little inventory, so it avoids one of the great risks of retail. And it's already a dominant internet website with a strong brand. Like eBay or Nasdaq, Farfetch enjoys powerful network effects that make it almost impossible to compete with them,” highlights the Fool, which also recalls that the company is expected to bring in about 1 billion dollars in revenues this year (luxury goods market is currently valued at 300 billion dollars.)

“At 9.55 dollars a share, the stock is dirt cheap,” conclude analysts from ’The Motley Fool’. “Shares are selling for only twice the book value and three times revenues. Management is forecasting robust growth, so the price is way below the rate of growth; Farfetch has a price-to-earnings-growth (PEG) ratio of 0.24. The share price seems to assume that we are heading into a deep recession and that women won't be buying expensive clothes anytime soon. Smart shoppers might say this is exactly the time to be looking for a steal.”

Image: Party collection, Farfetch Spain, Facebook.

Farfetch