Allbirds stock surged when it went public but has since fallen below its IPO price, and we ask, is it a good long-term investment today?
Dec. 9, 2021
The global footwear market continues to expand and is set to reach an estimated $440 billion by 2026. The majority of footwear sales are made by a small number of companies such as Nike, but can Allbirds (NASDAQ: BIRD) challenge the more prominent players with its eco-friendly footwear range?
The bull case for Allbirds:
Allbirds is a global lifestyle brand that makes footwear and apparel with naturally derived materials like merino wool. In 2014, Joey Zwillinger and former New Zealand soccer player Tim Brown co-founded the company and it is a certified B corporation.
Allbirds believes that the development of runners using naturally derived materials is a competitive advantage as they are better than their synthetic counterparts for comfort, style, and performance. TIME Magazine has previously named Allbirds most famous product, the wool runner, the "World's Most Comfortable Shoe". However, the company has evolved beyond its flagship woolen runners. It sells shoes made from other materials such as woven eucalyptus tree fiber and has partnered with Adidas.
Allbirds currently operates 35 stores, accounting for 11% of its sales in 2020, with the remainder coming from digital channels. The company reported revenue growth of 33% year-over-year in Q3 2021, reaching $63 million. It also has strong gross margins of 54% in Q3, as it only sells direct-to-consumer.
The company also has an intention to "reverse climate change through better business", and its runners have approximately 30% less of a carbon footprint than a standard pair. With consumers increasingly environmentally aware, Allbirds products provide a greener alternative. It has an impressive net promoter score of 86, and repeat customers accounted for 53% of revenue in 2020, demonstrating strong customer loyalty.
Beyond runners, the apparel industry is worth an estimated $1.5 trillion, and as it stands, apparel makes up just under 10% of Allbirds revenue, leaving an exciting opportunity for growth.
The bear case for Allbirds:
It operates in a highly competitive environment with a limited range of products. Its ability to develop its range will be a crucial factor in whether it can grow considerably. Companies with large cash reserves could encroach on its unique selling points with Nike already launching a low carbon footprint range and staying ahead of larger players with new offerings will be an arduous task.
In addition, the company is unprofitable and reported a net loss which almost doubled YoY to $13.8 million in Q3. The company is likely to be unprofitable for some time due to its heavy spending on marketing and research, and development to drive sales and product creation.
So, should I buy Allbirds stock?
Although Allbirds look promising, I am doubtful that this will be the next footwear giant but instead will remain a niche player and may be an acquisition target. For now, it probably deserves a spot on your watchlist to watch how the story unfolds over the next few quarters.
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Quickfire Round:
Where is Allbirds headquartered?
Allbirds is headquartered in San Francisco, California.
Does Allbirds pay a dividend?
No, nor does it intend on for the foreseeable future.
Who are Allbirds' competitors?
Its competitors include Nike, Greats, Rothy's, and more.
