Sustainable footwear manufacturer Allbirds (NASDAQ: BIRD) is now valued at roughly $4.1 billion following a hugely successful initial public offering (IPO) on Wednesday. The company saw its shares rocket up by over 90% at the close of trading to leave its value close to double what it started at before going public. Is the company a good investment though? Let's take a look.
Allbirds had initially priced just over 20 million shares at $15; then its first trade opened at $21.21, and by market close the price had shot up to $28.64 for a gain of almost 91%.
Allbirds' business model is based around being eco-friendly and offering consumers a more sustainable product than they can typically buy. This strong ethical stance has led to an intensely loyal following, particularly among young professionals. Repeat customers make up just over 50% of its sales and returning shoppers typically spend 25% more in their second year buying the brand. This type of brand loyalty is hard to build and can be an extremely strong sign to any potential investors.
When asked about the reasons behind the company's strong IPO, co-founder and co-CEO Joey Zwillinger pointed to the company's ethos of sustainability and environmentalism:
"People saw the genuine and authentic leadership that we're putting forward on ESG (environmental, social, and governance). Investors were really attracted by the opportunity to put their capital against great opportunity to create outcomes that were better for the planet."
The strength of Allbirds' IPO has drawn comparisons with another 2021 market debutant: Warby Parker. Both companies boast a strong brand and an evangelical following. Partner this with the fact that both companies' debuts led to valuations close to doubling and it's clear to see why people would sense similarities.
Arguably, Allbirds biggest attraction to investors is its ethical stance. As ethical investing continues to grow more popular, companies that put social causes to the forefront of their business models will invariably profit. Allbirds has made it very clear how it intends to help reverse climate change and offset its carbon footprint. A commitment to natural, eco-friendly materials is also a point of pride for the company. Investors can ride the wave of this trend towards more ethical investing by looking to companies like Allbirds to potentially add to their portfolios.
While its footwear offerings are certainly the cornerstone of the brand, Allbirds has also recently expanded into the athleisure space. The company revealed an activewear line in August made out of eucalyptus fibre and merino wool. Co-founder and co-CEO Tim Brown explained that "the disconnect between what we wear to improve our personal health and its negative impact on the health of our planet seemed like an important space for us to tackle." Investors will be excited to see what this expansion can offer the company in terms of additional revenue.
Competition in the footwear and athleisure industries is extremely high, however, and Allbirds will have to continue to innovate and grow in order to compete. Global giants such as Nike and Adidas command huge portions of the market and have the money behind them to continue to dominate the market for years to come. Allbirds has certainly done well to craft a niche for itself as one of the world's foremost eco-friendly footwear providers, but investors should keep an eye on just how much growth the company can achieve in the near future.
Allbirds is undoubtedly an extremely interesting company for potential investors. A blockbuster IPO and some brilliant underlying qualities make the stock a very viable option. However, it might be wise to wait to see some earnings reports over the next couple of quarters to really determine just how valuable an investment Allbirds might be.
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