Summary

The author of the article bought Farfetch stock before its earnings report and saw a significant increase of 30% in its value after the company reported strong financial performance.

Abstract

The author, who has been tracking Farfetch for some time, decided to invest in the luxury e-commerce platform prior to its earnings announcement. This decision proved fruitful as the stock price surged by 30% following the release of impressive quarterly results, including a 54.6% year-over-year revenue growth and a 44.6% increase in active consumers. The author was influenced by personal experiences with the platform's seamless online shopping experience and the company's strategic partnerships, such as the one with Harrods. Despite the inherent risks of investing right before earnings, the author's long-term confidence in Farfetch's potential, particularly its white label service, led to the investment. The author plans to increase their position post-earnings fever, indicating a bullish outlook on the company's future.

Opinions

The author believes Farfetch offers a superior online shopping experience, as evidenced by their spouse's positive experience.
Farfetch's high average order value suggests a strong presence in the luxury market.
The author values the company's seamless online experience and fast delivery, which they consider top-notch.
The author exercises caution with newly public companies, preferring to invest after some volatility has subsided.
The decision to invest in Farfetch was influenced by the company's collaboration with Harrods, seen as a significant opportunity.
The author considers the risk of a pump and dump scenario but ultimately trusts in Farfetch's growth potential.
Despite being up 24% on their investment, the author is more interested in increasing their position than locking in profits.
The author speculates whether Farfetch could become the luxury version of Amazon, indicating high expectations for the company's trajectory.

Bought Farfetch stock before earnings and it exploded 30%!

I have been following Farfetch for quite some time now and finally decided to take a position…and I am glad I did!

First things first!

For the ones that are not familiar with Farfetch, two tags make sense to describe this company! Luxury and e-commerce.

Farfetch is a tech platform focused on the luxury fashion industry providing a redefined online experience for customers. Being one of the most valuable e-commerce companies with a very recent IPO, it caught my attention when my wife actually became a customer.

Not really sure on the percentage of female customers but I do bet it is their biggest audience. So my wife decided to buy a purse which had to be somehow singular, exclusive, not crazy expensive and of course durable. Already knowing the platform beforehand due to strong digital influencers marketing campaigns and by actually having friends working there, my wife decided to take a look.

With an average price per order of around $600, we can assume that available items are definitely not cheap but still, you can find affordable products, especially on sale season.

Seamless online experience and fast delivery made the shopping experience top notch. Both I and my wife are usual online shoppers so we do value an easy but rich interface combined with a similar delivery experience.

And that was the end result!

OK, but a good experience as a customer does not make it an automatic buy! Sure thing!

However, Farfetch was already on my watchlist and set with a few alerts. Normally I do not enter a position just after an IPO mostly because there is no ground level. Therefore, during the first weeks, the stock price is likely to very volatile…

And I was right!

Let’s take a look at the stock price…

So the IPO brought the price down to the $18 level, making it the first support. Found some resistance at $24 level and made it sideways.

With the December sell-off, we had a new support level at $16 level. Unfortunately, I would normally open an initial position here but I chose to take other positions in stocks known as the blue-chips way safer than a very recently traded stock.

Having an alert around the $20 level, I was expecting it to pull back and finally, I would be ready to take a position. Cash was available and reserved for it…

But you see what just happened break-out with decent volume just a few days before earnings! Hmm…

So I had 2 guesses, a pump and dump for a quick gain or simply amazing earnings!

Decision point…

I did want to invest in Farfetch for the long term! Not just for the platform, they have built for but also for the white label they have just launched!

So when I did see the collaboration agreement with Harrods, I jumped in with no questions asked. And yes this was just one day before earnings! A huge risk for sure!

My risk management only allowed me to open a position with only 5 shares which I got at $24,38.

What about the earnings?

Farfetch simply nailed it. It was almost up 30% during the next trading day.

Revenue growth year over year of 54.6% and active consumers of 1.4 million with an increase of 44.6% quarter over quarter sound pretty good numbers to me. Is it the new Amazon luxury version?

Too soon to tell but I am excited. Guidance was also pointing to continuous growth and it has so much room on the upside.

I am currently up 24% on my position and as much as I wanted to lock in profits, I will be focusing on increasing my position size once the earnings fever has passed…

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Disclaimer: I am not a financial advisor. Always do your own research when investing in stocks.