Is Temple & Webster Group Ltd (ASX:TPW) still a buy?

Despite a recent selloff, there is still plenty for growth investors to like about ASX furniture ecommerce company Temple & Webster Group Ltd (ASX:TPW).
The post Is Temple & Webster Group Ltd (ASX:TPW) still a buy? appeared first on Motley Fool Australia. –

woman looking shocked at the watch on her wrist representing whether it is too late to buy the pointsbet share price

After surging to an all-time high of $14.05, shares in ASX furniture ecommerce company Temple & Webster Group Ltd (ASX:TPW) suffered a massive correction this week. Temple & Webster shares have plummeted almost 25% lower to $10.77 since the company’s annual general meeting (AGM) on Wednesday. It joined a number of other COVID-19 market darlings, including tech companies Megaport Ltd (ASX:MP1) and Whispir Ltd (ASX:WSP), that have suffered big selloffs this week as short-term investors took some of their profits off the table.

What sparked the selloff?

It’s hard to say what prompted the sharp decline in the Temple & Webster share price, as most news out of the AGM was positive. In his address to shareholders, company chair Stephen Heath touched on Temple & Webster’s impressive FY20 achievements. These included record annual revenues of $176.3 million and 483% growth in earnings before interest, tax, depreciation and amortisation (EBITDA).

CEO Mark Coulter then gave a trading update for FY21. First quarter EBITDA came in at $8.6 million, which was already greater than the company’s full year FY20 result. Revenue growth has been accelerating, with year-to-date revenues to October 19 up 138% against the prior comparative period.

There’s not much in those statements to deter investors. Could some of Temple & Webster’s forward-looking statements be overly optimistic? For example, the company assumes that COVID-19 lockdowns will create long-lasting structural changes in consumer behaviour. This may well be the case, but it’s still difficult to predict exactly how buying habits will change once lockdown restrictions ease. Particularly over the second half of FY21 and beyond.

There is also the potential that, as the recession starts to bite, consumers will have less disposable income to spend on luxury items like homewares and furniture. Additionally, as other industries including domestic tourism open up again, people have more options on where they can spend their money. Companies like Temple & Webster and JB Hi-Fi Ltd (ASX:JBH), which has also enjoyed a bump in revenues during lockdowns, might start to see their sales decline.

Investors may also have seen what Stephen Heath, Mark Coulter and co-founder and director Conrad Yui have been doing with their holdings. All three have sold significant parcels of their own shares in Temple & Webster in recent months. When those with inside knowledge of the company start selling off their holdings, it generally sends a message to the market that the share price might be getting overvalued.

Is now a good time to buy?

With the share price now essentially back to where it was in early September, now could be a good time to pick up shares in a growing company at bargain prices. Temple & Webster was a surprise success story to emerge out of COVID-19, but the company’s continued growth throughout the early stages of FY21 could signal that it still has plenty of gas left in the tank. Plus, the company ended FY20 with a strong balance sheet, consisting of almost $40 million in cash and nil debt.

There may be some lingering questions over how consumer behaviour will impact Temple & Webster’s sales over the longer-term. But the company is putting itself in a strong enough financial position to meet those challenges. I think it’s more likely the recent share price pullback has been driven by profit-taking from short-term investors, prompted in part by the actions of the company’s own leadership team. However, I think this could present new investors with a rare opportunity to pick up shares in this growing company at a significant discount.

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

Find out the names of our 3 Post COVID Stocks – For FREE!

*Returns as of 6/8/2020

More reading

Rhys Brock owns shares of MEGAPORT FPO, Temple & Webster Group Ltd, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Temple & Webster Group Ltd, and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is Temple & Webster Group Ltd (ASX:TPW) still a buy? appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!