Is it worth looking again at EZZ ? After a strong rally during 2024, the stock has now decreased by 50 % compared to its recent pick (at 28/11 before the market opening). So, I wonder if it may be worth looking at it again.
First, looking at the reasons for such a recent decrease of the share price : - Trump's election is probably a problem, while EZZ still has strong expectations with the US, (risks as Trump wants to increase duties on imports, in particular on Chinese companies and risky distribution strategy in the US to sell via Tik Tok), - disappointing Q1 cash flow, which decreased vs Q1 24, despite a 130 % increase for receipts (once again due to high marketing costs which increased by 194 % yoy).
So, for now, EZZ remains mainly a quasi Chinese company, as they do around 80 %+ of their sales there (and probably more of their profit). They still benefit from a strong growth there, which seems surprising while total e-commerce in China is now not increasing much.
Regarding the valuation, the stock does not look expensive with a free cash flow yield of 5 %+ which is high, if the company can keep its strong top line growth (cf receipt growth for Q1 and recent update at the AGM) and maintain marketing costs growth in line with sales growth.
Unlike previous periods, it seems that there is not an obvious link between marketing costs and sales, as the company seems to invest more in its brand (cf sponsoring contract) which has not necessarily a short term effect on sales (unlike when they work with influencers in China).
