“Valuation appears compelling, at ~4 times consensus 2023 estimated EV/Sales compared to its ~10 times post-IPO high and peers with comparable revenue growth at 5 times plus. Tempered valuation makes for an attractive entry point, particularly as an opportunity for BIRD [exists] to accelerate revenue growth to 28% in 2022 estimated from 24% in 2021 estimates,” said Morgan Stanley retail analyst Kimberly Greenberger in a note out on Thursday.
Greenberger upgraded her rating on Allbirds to Overweight (Buy equivalent) with a $17 price target.
Shares of Allbirds rose nearly 7% to $14.50 in trading on Thursday.
Greenberger’s buy-the-dip call appears to make sense for a few reasons.
First, Allbirds has shown it has strong promise in its early days as a public company even if profits still remain elusive as it invests in growth. Third quarter net sales rose 33% from a year ago. Gross profit margins rose 120 basis points year-over-year.
NEW YORK, NEW YORK – AUGUST 31: People shop at Allbirds store, a maker of sustainable shoes, in lower Manhattan on August 31, 2021 in New York City. The shoe company has announced that it is preparing an initial public offering (IPO). The company has lost money and expects it will continue to be unprofitable for the foreseeable future. (Photo by Spencer Platt/Getty Images)
Allbirds co-CEO and co-founder Joey Zwillinger told Yahoo Finance Live the product development is strong for 2022.
“So much exciting things coming out of our company in the coming 12 months. We’ve got the performance side and our lifestyle side, and that’s true now for footwear in particular, but also with apparel. As we go up the body, we’re bringing some of these natural material innovations to bear on incredible second skin comfort. So this is the most exciting kind of 12 to 24 months of product pipeline that we’ve put out,” Zwillinger added.
Meanwhile, the company has a strong ESG message that aligns with increasing investor appetite for responsibly run companies.
Allbirds defined itself in its prospectus in 2021 as a “sustainable public equity offering.” By that, Allbirds will be required to adhere to certain ESG (environmental, social and governance) standards.
They include, according to the filing, “a minimum ESG rating, a stakeholder-centric mission and purpose, best practices on climate responses, value chain, people management, and corporate governance, transparent reporting of ESG practices and matters, and commitments to make meaningful progress on important ESG matters.”
“Allbirds is a distinctive, ESG-driven brand with a potentially long growth runway ahead,” said Greenberger.