Kogan Share Price Down, Results Fail to Impress The Market (ASX:KGN)

It’s always funny seeing a company post record results, only to be met by an investor exodus.

There’s just that little extra sting to this kind of market move. A sting that Kogan.com Ltd [ASX:KGN] is certainly feeling today.

Because despite what looks like a marvellous six-month trading period, the Kogan share price are down 10.26% at time of writing. Falling on the back of broader market unease, as well as concerns of overvalued bubbles.

So, is this the start of larger fall for Kogan, or just a small bump in the road?

Figures versus feelings

Let’s start by taking a look at the good news first.

At first glance, Kogan’s half-year results seem incredible. Revenue is up 88.6% to $414 million, year-on-year. And post-tax profit is up a whopping 164.2% to $14.66 million.

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For any other company, that would be some insane growth.

When it comes to Kogan though, investors and the market have been eagerly anticipating this growth. Seeing the writing on the wall as online shopping took off amidst the pandemic last year. And that’s why, the stock went on a tear.

So, while these results are great, investors have already been buying the stock in anticipation of this sizeable growth. Paying through the nose for a company that is expected to deliver big in future.

Because of this, Kogan’s results may not have impressed nearly as much as some hoped.

On top of that though, and a far more nebulous reason for today’s fall, is the broader market itself. With growing concerns over bond yields, inflation, and potential consequences for earnings across the board. A scenario that will likely hit ‘overvalued’ stocks — like Kogan — the hardest.

It’s a clear case of feelings (in this case, investor sentiment) getting in the way of the financial figures.

At least, that’s the easiest way to interpret it.

As for whether this downturn will be a protracted one or not, well, that’s tougher to say.

I think it’s fair to say that some stocks on the ASX are undeniably overvalued. Propped up by cheap money, low interest rates, government handouts, and a ravenous investor appetite.

When it comes to Kogan though, you can’t deny that they’ve come a long way. And while the stock may still be relatively pricey compared to their current earnings, it is rapidly growing business. Making it far harder to determine what Kogan’s fair value may actually be.

That’s why I wouldn’t be surprised to see the share price head either up or down from here.

One thing’s for sure though, it certainly isn’t going to trade sideways.

KGN: Buy, sell, or hold?

When it comes to Kogan, right now you’re presented with a variety of choices. Each of which could sway your decision to buy, sell, or hold KGN stock.

In my view, making this decision depends largely on what your needs are. Because if you’re taking a purely short-term perspective, selling seems like the obvious choice. Whereas in direct contrast, if you’re looking ahead to the next two or three years, holding seems more prudent.

And as brash as it might seem, there is even an argument for buying. Especially if you distil today’s half-year figures from the ASX’s sea of red.

Therefore, it is up to you as an individual to gauge what is best. Making a decision based on your own goals, circumstances, and outlook.

As we like to remind Money Morning readers every so often, being a systematic investor is the best thing you can do. Taking away the emotional impulses that can jeopardise your wealth just as much as a bad trade.

If you’d like to learn how to better these skills, then we suggest learning how to implement a system of your own. Utilising some of the techniques that make some of our own trading experts exactly that…experts.

Check out this report on effective risk management to get you started.

Because at the very least, it’ll give you glimpse at what it takes to navigate choppy markets like today’s.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

PS: Four Well-Positioned Small-Cap Stocks — These innovative Aussie companies are well placed to capitalise on post-lockdown megatrends. Click here to learn more.


Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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