Allegro Shares Plunge: Q3 2024 Earnings Forecast Disappoints, Market Reacts
Allegro (WA:) Stock Drops Amidst Slower Earnings Growth Forecast for Q3 2024
Investing.com -- Shares of Allegro (WA:) tumbled on Thursday following a disappointing forecast for the company's third-quarter 2024 earnings growth.
As of 5:12 am (0912 GMT), Allegro was trading 7.8% lower at PLN 35.70.
The company has projected that Polish Gross Merchandise Value (GMV) growth will decelerate to a range of 10-11%, falling short of the 12% anticipated by market consensus.
Revenue growth in Poland is projected to be between 16-18%, below the 19% forecasted by analysts.
Furthermore, adjusted EBITDA growth in Poland is expected to slow to 11-13%, significantly lower than the 15% expected by the market.
At the consolidated level, Allegro's guidance includes GMV growth of 9-10%, which is below the 12% anticipated by consensus.
Revenue growth is forecasted to be between 8-10%, compared to the 12% projected by analysts.
Adjusted EBITDA growth is anticipated to be 5-8%, falling short of the 12% forecasted by the market.
“Some profit-taking in the shares may be on the cards as earnings growth has peaked with no immediate upside to the Street’s FY24 expectations implied from the 3Q24 guidance and as international losses do not seem to have bottomed out,” said analysts at J.P. Morgan in a note.
In its second-quarter results, Allegro reported solid performance, exceeding expectations in key areas. The company's Polish GMV grew by 12% year-over-year to PLN 15 billion, slightly surpassing both company guidance and consensus estimates.
Adjusted EBITDA in Poland was at PLN 908 million, reflecting a 35% increase compared to the previous year. This was not only 4% ahead of consensus but also above the company's initial guidance of 26-29% growth.
On a group level, consolidated adjusted EBITDA stood at PLN 763 million, marking a 32% year-over-year increase and exceeding consensus estimates by 3%.
However, international operations reported an adjusted EBITDA loss of PLN 145 million, which was in line with the consensus forecast of a PLN 138 million loss.
“2Q24 results alone are strong but the soft guidance is likely to take precedence as it is likely to result in consensus downgrades,” said analysts at UBS.
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Analysis: Breaking It Down for You
What Happened?
Allegro, a major player in the Polish e-commerce market, has lowered its earnings growth forecast for the third quarter of 2024. This news caused the company's stock to drop by 7.8%.
Key Metrics:
- Polish GMV Growth: Expected to be 10-11%, down from an anticipated 12%.
- Revenue Growth in Poland: Projected at 16-18%, lower than the 19% expected by analysts.
- Adjusted EBITDA Growth in Poland: Forecasted to be 11-13%, significantly below the 15% market expectation.
Consolidated Metrics:
- Overall GMV Growth: 9-10%, compared to the 12% consensus.
- Revenue Growth: 8-10%, below the 12% projected by analysts.
- Adjusted EBITDA Growth: 5-8%, falling short of the 12% market expectation.
Why It Matters:
- Investor Reaction: The lower-than-expected growth forecasts have led to a sell-off in Allegro shares.
- Market Sentiment: This soft guidance has overshadowed the company's strong second-quarter performance and is likely to lead to consensus downgrades.
- Short-Term Impact: Investors may see this as an opportunity to take profits, given no immediate upside indicated for FY24.
How Does This Affect You?
- For Investors: If you're holding Allegro shares, this downturn might be a signal to reassess your portfolio. Consider if the long-term prospects still align with your investment goals.
- For Potential Investors: This dip might present a buying opportunity if you believe in Allegro's long-term growth story.
- For Market Watchers: This event highlights the importance of closely following company guidance and market expectations, as they can significantly impact stock performance.
In summary, while Allegro's recent performance was strong, the future outlook has caused concern among investors, leading to a notable drop in share price. Understanding these dynamics can help you make informed decisions about your investments.