Hmmm I don't think a GST error is something material enough to justify the drop to be honest. I say this as an accountant for an ASX listed company and can confirm it's fairly common for even the big companies to have disagreements with the ATO and end up paying more than was forecasted/budgeted due to error. Nonetheless this stuff needs to be fixed by management it's still not a good look.
I think the drop is due to a few things: - Poor UK revenue performance (I think last trading update it was only 2% growth YoY which is pretty bad considering the stage this company is at). STP should be getting at least 10-15% YoY revenue growth, and if they break into US market, much higher. 2% is not ideal.
- Supply chain issues - There have been so many stockouts as well as inability to deliver christmas stock in time to customers. I think analysts are assuming the shipping issues at christmas have led to less christmas sales and therefore will materially hinder STP's ability to meet their FY22 EBITDA guidance.
- General market movement - any recently IPOd company, loss making business, risky business, market cap <1B has really been smashed the last few months, not just STP. I assume many people on hotcopper who have mid/small cap stocks have felt the brunt the last couple months.
How I believe STP could go higher: - They need to break into US market and kill it there. It's been extremely impressive how they have grown extremely fast in Australia and if they can show they can replicate this kind of growth in the US I don't see why the share prie can't go to at least $3. They just need to sort out their shipping/supply chain issues before they execute US. It's already proven problematic in the UK christmas sales where they lost so many opportunities because of poor supply chain.
Why I think this share price drop is harsh: - It is pretty rare to see any business go from $1.3M revenue 30/06/2018 to $61M 30/06/2021 and STILL maintaining positive EBITDA. People seem to forget this as soon as there is one ounce of not so perfect news...... Yes they are spending a crap ton on marketing/advertising but if management can show they can still maintain stable EBITDA growth I don't see why they can't replicate this success in the US.
STP Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
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