Shares of social commerce platform operator Poshmark (NASDAQ:POSH) plunged after the company hinted at slowing growth in its first quarter earnings report, with POSH stock dropping more than 10% on the news.
Specifically, while the company topped first quarter revenue and earnings estimates, Poshmark also guided light on Q2 revenues and called for revenue growth to slow from 42% in Q1, to just 20% in Q2. In this environment where investors are shunning tech stocks against the backdrop of rising inflation pressures, that slight hiccup isn’t going to cut it. So, it should be no surprise to see POSH stock plunging.
Still, the big-picture fundamentals underlying Poshmark as an emerging social commerce platform with enormous potential are unchanged. So is the fact that this company is growing very quickly, doing everything right to sustain that growth, and largely trending in the right direction towards becoming a very popular global e-retail platform.
So, if you’re a long-term investor, the recent drawdown in Poshmark stock is a great buying opportunity. Over the next few years, we see shares trending above $100.
POSH Stock: Poshmark Is Still Growing Rapidly
The big reasons why POSH stock is down so much today is because the company is guiding for a rapid revenue growth deceleration in Q2.
Specifically, revenues rose 42% in Q1, and are now expected to rise just 20% in Q2. That’s no good. Growth stocks need to keep growing in order to justify their premium valuations. Poshmark appears to be slowing down.
But the above data needs context.
In the first quarter of last year, Poshmark reported 8% revenue growth, because everyone stopped shopping in March. In the second quarter, Poshmark reported a whopping 41% revenue growth, because in April, May, and June, people began shopping again and were doing so exclusively online. In other words, in 2020, Poshmark had a bad Q1 and a great Q2.
So, when you take into context, it becomes clear that Poshmark’s growth is actually speeding up — not slowing down.
On a two-year-stack basis (2020 growth plus 2021 growth), Poshmark’s revenue growth was 50% in Q1. In Q2, it’ll be 60%. This business is accelerating, not decelerating as the headline numbers would have you believe.
Because of this, we think the big drop in POSH stock is overdone — and actually an excellent buying opportunity.
Near-Term Weakness Is a Long-Term Opportunity
We love what Poshmark is doing as a company in trying to create a digital social marketplace for resale items.
They are at the epicenter of three huge megatrends. One, the shift towards online shopping, because it’s more convenient. Two, the shift towards social commerce, because it enables more fluid product discovery. Three, the shift towards the resale market, because it’s cheaper.
Poshmark has built the leading marketplace at the epicenter of these three enormous societal shifts.
More than that, though, management is doing everything right to improve the platform and grow the business in these powerful megatrends.
The company is making a big push on video, and has recently rolled out video selling capabilities where sellers can film a product and directly sell that product through the video. Management is also continuously expanding into new product categories, with “pets” being the latest successful addition. They are also addressing one of the biggest pain-points of the resale market — shipping costs — by giving sellers the option to offer shipping discounts on certain items. And they’re improving the seller process with things like style tags and a price suggester.
Make no mistake. This is a relentlessly innovative management team that isn’t just resting on its laurels of having the world’s leading social commerce market place. They’re doing everything in their power to make Poshmark the world’s leading commerce marketplace. Period.
And that’s why we are such huge fans of POSH stock long-term. This is a company oozing with potential, and a lot of that potential isn’t priced into POSH stock.
Bottom Line on POSH Stock
The recent growth sector meltdown has created multiple golden buying opportunities for long-term investors. POSH stock is one such opportunity.
But it is far from the only amazing buying opportunity with huge upside potential in today’s market.
The reality here, folks, is that technology is taking over the world — and while Wall Street is choosing to ignore this reality at the moment, the truth always comes out in the end. Soon enough, inflation fears will pass, the “reopening trade” will fizzle out, and money will come running back to the only logical place it can be parked for the next 5 to 10 years: Technology stocks.
This is a once-in-a-lifetime buying opportunity into the stocks of companies that are changing the world.
Don’t let this opportunity pass you up. Capitalize on it by joining me and my team at Innovation Investor, where we are researching all day and night to identify the best tech stock picks in the market today — stocks that could, with time, soar 10X.
Click here to seize the moment.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this video.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the focus of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative next-generation mobility stocks, become a subscriber of Innovation Investor today.