KeyBanc Capital Markets analyst Noah Zatzkin downgraded Farfetch Limited (NYSE:FTCH) to Sector Weight from Overweight.
FTCH posted softer 2Q results and lowered guidance amid a difficult environment.
The analyst downgraded FTCH based on decreased confidence in execution and the timeline to profitability.
Macro headwinds and softness within Brand Platform GMV (-42% y/y CC) weighed on the quarter and softened expectations around Reebok ($200 million in FY23, previously $300 million) alongside y/y declines in the U.S. and China increased risk to achieving profitability in FY23.
Though the analyst sees cost rationalization initiatives positively, Zatzkin thinks reduced guidance implies a fairly tough 2H hurdle, given softer trends.
FTCH provided updated GMV guidance of about $4.4 billion (previously ~$4.9 billion, inclusive of ~$3.85 billion Digital Platform and ~$0.45 billion Brand Platform), which assumes an improvement in top-line trends in 2H as new partnerships materialize, notes the analyst.
Looking to FY23, FTCH expects GM improvement and sequential adjusted EBITDA improvement moving through the year, though now to a lesser extent: the adjusted EBITDA margin guide was refined to ~1% for FY23 (previously 1-3%).
Based on the above, the analyst lowered the FY23 revenue estimate from $2.866 billion to $2.500 billion.
For FY24, the analyst lowered the revenue estimate from $3.473 billion to $3.038 billion.
Price Action: FTCH shares are trading lower by 46.5% to $2.54 on the last check Friday.
