After the firm released its June quarter results after market close on Friday, shares of FSN E-commerce ventures, the parent company of online retailer Nykaa, fell as much as 10% on Monday.
Since November 2022, this is the company’s largest one-day decline. At this time of the day, the stock is likewise falling on volumes that are almost ten times larger than its 20-day average.
Here are the top five causes of the stock price decline: First off, the company’s GMV increased by 24 percent in the June quarter, while the fashion industry’s GMV increased by 12 percent.
The GMV of the fashion industry, however, decreased by 1.6% sequentially. Due to rising marketing expenses, the contribution margin for the fashion industry also decreased by 50 basis points during the quarter.
Second, the company’s platform saw a decline in ad revenue. Direct-to-Consumer players reduced their advertising expenditures, and switching to a new ad platform was difficult.The mix of Nyka eB2B vertical, known as Superstore, increased, which had an effect on its gross margin by 89 basis points year over year.
The stock was downgraded to neutral by brokerage Nomura in response to the findings, and its price target was lowered to Rs 163. Nomura anticipates Nykaa’s growth to remain ahead of the sector, although at a higher cost.
Nykaa is similarly rated as underweight by JPMorgan, with a 105 rupee price target. The earnings were described as being below expectations. The price objective set by the firm represents a potential 27 percent decline from Friday’s closing price.13 of the 23 analysts that follow Nykaa still rate the stock as a buy; the other five rate the stock as either a hold or a sell.
According to Nomura, the stock’s valuation at the moment is 5.4 times enterprise value to sales, which is within the fair value range.
At Rs 135 per share, Nykaa shares are currently trading 7.7% lower. The stock has lost 13% of its value so far this year.
