What Happened?
Shares of healthcare apparel company Figs (NYSE: FIGS) fell 3.4% in the pre-market session after investors reacted to a cautious outlook from Wall Street analysts, which included a "Sell" rating from Goldman Sachs.
The negative sentiment followed recent ratings from major firms. For instance, Goldman Sachs reiterated a "Sell" rating on the stock, although it raised its price target to $4.50. Similarly, Morgan Stanley maintained a "Hold" rating while increasing its price target to $5.00. The overall consensus rating for the company remained a "Hold," with an average price target that suggested a potential downside from its recent trading price. This cautious analyst environment appeared to overshadow a rally from the previous day, which some reports suggested might have been difficult to sustain.
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What Is The Market Telling Us
Figs’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 29.5% on the news that the company reported weak third-quarter earnings. Its EBITDA missed, and its EPS fell short of Wall Street's estimates. Sales declined slightly by 1.5% year-over-year. This decrease was primarily due to lower average order values.
On the other hand, orders from existing customers increased. Profitability took a hit as adjusted EBITDA margin dropped significantly to 3.4% from 17.2% last year, impacted by higher marketing costs and fulfillment center expenses. Given the weak results, FIGS lowered its full-year revenue growth and EBITDA margin guidance, which is always a worrisome sign. Overall, this quarter could have been better.
Figs is up 11.7% since the beginning of the year, and at $6.58 per share, it is trading close to its 52-week high of $6.84 from September 2024. Investors who bought $1,000 worth of Figs’s shares at the IPO in May 2021 would now be looking at an investment worth $219.22.
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