We haven't been able to take payment
You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Act now to keep your subscription
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Your subscription is due to terminate
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account, otherwise your subscription will terminate.
author-image
SABAH MEDDINGS | THE TIPSTER

Share tip: Moonpig may have grown a little too porky

The Sunday Times

Fancy a personalised gift card? Or a miniature Christmas tree that fits through the letterbox? Look no further than the online retailer Moonpig.

The FTSE 250 company, which was founded just over 20 years ago selling greeting cards online, has grown into a retail giant that pulled in more than 50 million orders in its last financial year.

Moonpig floated in February, bounding onto the market at a £1.2 billion valuation. Investors were enthused by the “Covid winner”, which enjoyed soaring sales in lockdown. At the end of the first day of trading, the company was valued at almost £1.5 billion.

However, while the stock rose to a peak of 488p in June, it has since drifted, closing on Friday at 325p, valuing Moonpig at £1.1 billion. Its forward price to earnings ratio is 33.9 times. in a recent note, analysts at Davy criticised the “rather anaemic equity performance” since its listing, saying : “The risk reward is not compelling.”

Moonpig was founded in 2000 by Nick Jenkins, a former commodities trader who went on to become a Dragons’ Den star. It began with personalised online cards before expanding into flowers, chocolates and biscuits. Moonpig was bought by Photobox for £120 million in 2011, which in turn was bought by the private equity firm Exponent in 2015. After the flotation, Exponent retained a 27 per cent stake. However, this holding presents an unhelpful overhang on the shares.

Advertisement

About 54 per cent of revenue comes from online cards and 46 per cent from gifts, with sales last year reaching £368.2 million, and pre-tax profits of £32.9 million. During lockdown, Moonpig did well while high street shops such as Card Factory and Clinton’s were closed — with revenues jumping 113 per cent.

The question is whether it can retain its momentum. Moonpig does not expect to maintain those growth levels now that restrictions have eased, and it is valued more as a tech stock than an online retailer. And the long-term trend for greeting cards being sent is falling over time.

However, the value of each order is rising, and the Omicron variant could work in Moonpig’s favour, pushing customers back online. With concerns about Omicron spooking shoppers, Moonpig is likely to benefit from a further shift to e-commerce.

Moonpig is due to report results for the six months to October 31 on Thursday, when investors will see how much its big splash out on advertising boosted market share. Despite the drift in its shares, Moonpig needs to do more to justify its valuation.

Avoid.

PROMOTED CONTENT