Shares of e-commerce fashion retailer Farfetch (NYSE:FTCH) rallied 22.8% yesterday following the buzz that founder and CEO Jose Neves is planning to privatize the company. Neves has a 15% stake in the company but holds almost 77% of the voting rights, thanks to the dual-class structure of the shares. The Telegraph noted that Neves has the backing of the major shareholders, namely Chinese e-commerce giant Alibaba (NYSE:BABA) and Swiss-based luxury giant Richemont. The report also mentioned that the founder has reportedly hired JPMorgan (NYSE:JPM) as the advisor for the process.
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The company has had an ugly journey since its 2018 listing on the New York Stock Exchange (NYSE). FTCH stock has lost 52.4% year-to-date and nearly 94% since its initial public offering (IPO). After the hype in online shopping during the pandemic years, Farfetch saw a huge slump in demand owing to the macroeconomic conditions.
Interestingly, the news of the firm going private came just as investors were waiting for Farfetch to release its third-quarter fiscal 2023 earnings today. The company has indefinitely postponed its plan to release its results. Wall Street was expecting FTCH to post an adjusted loss of $0.17 per share on revenues of $612.85 million. Farfetch will “provide a market update in due course,” the company added.
Is Farfetch a Good Stock to Buy?
Commenting on Neves’ takeover news, Wedbush analyst Tom Nikic believes that Neves can manage the business without having to answer or report publicly about Farfetch’s financial condition.
Meanwhile, ahead of Farfetch’s Q3 print, Citi analyst Monique Pollard reiterated a Sell rating on FTCH stock with a price target of $3 (42.9% downside). Pollard sees the stock as a high-risk investment owing to factors such as share price volatility, earnings and margin uncertainty, negative free cash flow (FCF), and the risk of further equity dilution from convertible bonds issued in 2020.
Overall, analysts have a Hold consensus rating on FTCH stock. This is based on three Buys, two Holds, and two Sell ratings. The average Farfetch price target of $5.04 implies 140% upside potential from current levels. But bear in mind that the current price target and analyst consensus are based on views given before Neves’ takeover news.
