Several months ago, one of our grown daughters mentioned how much she liked footwear company Allbirds' (BIRD) products. She'd even pulled a "Peter Lynch" and bought a handful of shares.
Unfamiliar with Allbirds at the time, after checking it out, I was horrified. BIRD was a high-flying recent IPO, having gone public at $15/share last November. On November 3, the first day of trading, the shares opened at $21.42, traded as high as $32.44, and closed at $28.89. It's been all downhill ever since; the shares closed Tuesday at $5.41.
Dumpster-diving bottom-fisher, and busted IPO fan that I am at times, I've been watching BIRD crater. On Monday, with the shares hovering just above $5, I took a position. The growth crowd has moved on from BIRD rather quickly, and I saw some potential value there. In fact, BIRD is now a "triple-net," trading at between 2 and 3 times net current asset value or NCAV (current assets minus total liabilities).
At the time of my purchase, it was trading at just 2.29 times NCAV. That's fairly uncommon for a recent IPO, and demonstrates the level to which investors have already given up on the name.
Allbirds ended 2021 with $287 million, or $1.95/share in cash and no debt. While that's a solid level of cash given that BIRD trades in the $5 range, it needs to be taken with a grain of salt. BIRD is not yet profitable, and while consensus estimates show losses narrowing, the company is not expected to show an annual profit until 2025. That means that the company will be burning cash as it attempts to generate a positive bottom line. Cash levels provide somewhat of a runway to get there, but it is unclear how long that runway is.
Revenue is headed in the right direction, though. In 2021, sales grew 27% to $277.5 million. For the fourth quarter, revenue was up 23% to $97.2 million, and the company lost $0.09 per share which was in line with consensus estimates.
Company guidance puts 2022 revenue in the $355 million-$365 million range, up between 28% to 32% over 2021. That puts the forward price-to-sales ratio at between 2.14x and 2.2x, which does not appear to be a ridiculous level. BIRD has a rather tiny enterprise value (EV) of about $492 million.
The ride with BIRD will likely not be a smooth one, but to me, this busted IPO was worth a little bit of speculative capital. This, however, is another one that is not for the faint of heart.
