Ann: S&P DJI Announces September 2020 Quarterly Rebalance, page-11

www.********.au/2020/09/03/is-the-kogan-com-share-price-a-strong-buy/

There is argument that buying on dips is a good idea on Kogan regardless it is now a little expensive, still a good long term investment. If it goes down further I will consider buying more but definitely not selling for quite a while. The recession is starting to bite now I think and people's optimism may be wearing down but it will return as will retail therapy and the next financial results re KGN will give the SP a re-boot.

MOTLEY FOOL says (4.9.2020)

Is the Kogan.com Ltd (ASX: KGN) share price a strong buy? It has been a great performer since the COVID-19 crash.

Indeed, over the past six months the Kogan.com share price has risen by 390%. The ecommerce business has done incredibly well at capturing retail market share.

Whilst the situation with the global pandemic is tragic, Kogan.com has experienced an enormous rise in demand for its services. Customers have still wanted to buy phones, laptops and so on.

The FY20 result was very impressive. Gross sales increased by 39.3% to $768.9 million and revenue went up by 13.5% to $497.9 million. Gross profit increased by 39.6% to $126.5 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 57.6% to $49.7 million and net profit after tax (NPAT) grew by 55.9% to $26.8 million.

The second half of the 2020 financial year, which included COVID-19, was particularly strong. Gross sales, gross profit and adjusted EBITDA grew by 62.5%, 68.3% and 74.1% respectively. Those are strong growth numbers. With growth like that, it’s no wonder the Kogan.com share price has gone up so much.

Kogan.com is not an early-stage growth business. It’s not an unprofitable buy now, pay later business. It’s making real profit and it’s even paying a dividend. Kogan.com declared a fully franked final dividend of 13.5 cents per share, up 64.6% on the prior year. Long-term shareholders are now getting a very good yield on their original purchase cost.

The online business grew its active customer base by 35.7% to 2.18 million people. Kogan.com is the type of business that can really excel with network effects. It offers so many different services like mobile, insurance and superannuation. The company can work on selling a wider variety of services which should lead to higher margins.

Is the Kogan.com share price a strong buy today?

It can be a mistake to think that something is expensive just because it has gone up in price. A few years ago there was a buying frenzy for A2 Milk Company Ltd (ASX: A2M) infant formula. The A2 Milk share price has gone from $1.80 in September 2016 to $16.84 today. I’m not suggesting that the Kogan.com share price will be worth $200 in a few years, but it shows that a high-growth business can keep growing for longer than expected.

In July 2020 Kogan.com saw gross sales grow by more than 110%, gross profit increased by more than 160% and adjusted EBITDA was more than $10 million. Remember that FY20’s total adjusted EBITDA was $49.7 million. The growth seems to be accelerating.

At the current Kogan.com share price it’s trading at 50x FY21’s estimated earnings. That doesn’t look bad if the ASX share can continue a good growth rate for the medium-term.

But how long can this growth last? I have a feeling that some of the overall strong retail demand may slow down once the government stimulus starts to taper off. ASX retail shares weren’t demonstrating this kind of growth in 2019.

However, Kogan.com does benefit from the fact that it’s an online business. Some consumers may well permanently switch to online shopping rather than going to a physical store. Just look at how well Temple & Webster Group Ltd (ASX: TPW) is doing as an online retailer.

If you could travel back in time then obviously it would make sense to buy shares when the Kogan.com share price was under $5. But what about now? I don’t think Kogan.com is a ‘strong’ buy. However, I think that Kogan.com’s expanding product range and growing customer base will support growing earnings over the long-term.

I believe that it is worth a long-term buy today because the online shopping trend seems like a permanent shift and this should help Kogan.com’s earnings considerably. I’d be happy to accumulate during dips. As a bonus, Kogan.com offers a grossed-up dividend yield of 1.4%.