There’s no gentle way to say it. Allbirds stock is in trouble. The company has struggled since its November 2021 IPO, and it is perilously close to dropping below $1 per share. That threshold is key, as an extended period below $1 per share may result in delisting from the Nasdaq.
Allbirds (NASDAQ:BIRD) went public when the market was booming, and tech stocks were at all-time highs. Shares were originally priced at $15, and the very first trade of Allbirds stock came in at $21.21. By the end of the trading day, Allbirds stock was up 91 percent at $28.64.
After the successful debut, investors had high hopes for the future of Allbirds – but their enthusiasm was short-lived. By mid-December 2021, the stock traded below $14 per share, and aside from a few small, brief spikes, Allbirds stock has dropped steadily ever since.
What does Allbirds do? And why did Allbirds stock go down? More importantly, will Allbirds stock recover?
What Does Allbirds Do?
Allbirds has shown that when it comes to clothing and footwear, high-quality design, comfort, and sustainability aren’t mutually exclusive. It has made great strides towards proving its point. Allbirds is a certified B-Corp, and it has a comprehensive strategy for minimizing environmental impact by leveraging sustainable materials in manufacturing its distinctive shoes and apparel.
There is a reason why Allbirds stock had such a strong first day on the Nasdaq. The company had impressed some of the biggest influencers in the world. Barack Obama was spotted with a pair of the eco-friendly wool shoes, and many of the movers and shakers in the tech world wore Allbirds to work.
Celebrities like Ben Affleck, Cindy Crawford, Mila Kunis, and Ashton Kutcher were photographed wearing Allbirds, and their fans took note – and went shopping for their own.
The premise behind Allbirds is particularly appealing to Millennials and Gen Z-ers, who are generally more concerned with minimizing environmental impact than previous generations. Once the Allbirds brand caught on with this key demographic, inventors assumed the company would be a success. That’s not what happened.
Why Did Allbirds Stock Go Down?
A look at earnings statements shows why Allbirds stock has declined month after month and quarter after quarter. Essentially, revenue is falling, and the company isn’t remotely poised to achieve profitability in the foreseeable future.
Though Allbirds exceeded expectations for second-quarter 2023, it’s hard to celebrate. Analysts forecast revenue of $66.8 million for the three-month period ending June 30, 2023, and the company reported net revenue of $70.5 million. That sounds like a win, but the trouble is that $70.5 million is still $9.8m lower than the same period in 2022.
Allbirds explained that the decline in revenue was caused by lower average selling prices for its products. Between third-party sales and promotional activity, customers paid less for Allbirds shoes and clothing, and that’s not a good sign. The downward pressure on prices suggests lower demand – and that the Allbirds brand has fallen out of fashion. If the Allbirds trend has fizzled, the shoes may never sell for premium prices again.
Allbirds is working hard to turn things around, as evidenced by a substantial 24 percent drop in inventory and improvement in gross margin for the quarter. The bad news is that Allbirds is still losing money. The company reported a net loss of $28.9 million for the second quarter, which breaks down to a loss of $0.19 per basic and diluted share.
Some growth companies can hang on, even after 20 consecutive quarters of negative operating income like Allbirds. However, the companies that survive lean times and go on to become profitable typically show signs of improving financials. Allbirds hasn’t done that – and that’s not the worst of it. If store leases are considered in the debt category, Allbirds may have already crossed into bankruptcy territory.
Will Allbirds Stock Recover?
Allbirds faces tremendous obstacles if it intends to persevere. An analysis of its fundamentals is sobering – very little is right with the company. In fact, there is an argument that its primary asset is its brand. Consumers have come to associate Allbirds with sustainability, and there is a solid demand for eco-friendly footwear.
Unfortunately, that brand is not enough to carry Allbirds through its current financial distress, and negative media attention has tarnished the company’s green image. The shoes that could once be found on the feet of Silicon Valley’s entrepreneurs and innovators are falling out of favor for a variety of reasons, and the one that is most likely to seal the company’s fate is poor quality.
A series of customer complaints about the quality of Allbirds’ products has pushed eco-conscious consumers to other brands – and there are a lot to choose from. That fact, coupled with Allbirds’ poor performance and its vulnerable financial position, make it an extremely risky investment. An inability to bring in capital is almost certain to result in the end of Allbirds. In short, Allbirds stock is unlikely to recover.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.