Saturday, August 15, 2020

Why the Kogan share price soared 38% in June

Miniature shopping trolley filled with parcels next to laptop computer

Shares in online retailer Kogan.com Ltd (ASX: KGN) have exploded since the beginning of the pandemic, hitting a record high of $15.51 in June. This included a whopping 38% increase in that month alone. Even more impressive was the fact that Kogan’s new June high was up more than 309% from its low of $3.79 in March.

Since the end of June, the Kogan share price has continued to storm ever higher, sitting at $16.87 at the time of writing. Shares of Kogan are now up more than 120% for the year. These are impressive gains but even more so when compared with the 10.5% drop in the S&P/ASX 200 Index (ASX: XJO) year to date.

Why did the Kogan share price rally in June?

The increases in the Kogan share price throughout the pandemic have been well documented, with online sales surging during COVID-19 lockdowns. But since the initial glut of consumers rushing to kit out their home offices and entertainment spaces had somewhat abated by June, what was going on to keep the Kogan share price surging? Essentially, a fairly consistent stream of good news is what:

On 5 June, Kogan announced a business update that advised its active customer base had continued on a strong growth trajectory, with an additional 126,000 active customers added in May. The release also noted that gross profit had risen 130% in the fourth quarter. Even more impressive, was the monster increase in adjusted EBITDA that grew by more than 200%. Unsurprisingly, the Kogan share price surged 8.6% in the two days following the announcement.

Five days later, Kogan announced plans for a $100 million placement and $15 million share purchase plan. The share purchase plan was later increased to $20 million as a result of a massive oversubscription totalling more than $115 million. The shares were on offer at $11.45 which represented a 7.5% discount on the share price at the time. That $11.45 price point certainly looks to be great value in hindsight given the shares since soared to an all-time record of $17.67.

The funds from the capital raise were to be used to provide Kogan with the financial flexibility to act quickly on future opportunities. The company has already demonstrated its willingness to decisively capitalise on market conditions in the past with its acquisition of Matt Blatt in May.

What’s next for the Kogan share price?

The strong growth of the ASX retailer in June has continued into July with the Kogan share price increasing nearly 15% so far this month. Investors didn’t seem particularly impressed by yesterday’s announcement that Kogan’s share purchase plan had been significantly oversubscribed as its shares actually shed value on Wednesday. But today, it was back in the black with the Kogan share price climbing 2.5% to $16.87 at the time of writing. Perhaps investors feel renewed lockdown restrictions put in place in Victoria will result in an even greater swing towards online shopping. Watch this space…

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Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Kogan share price soared 38% in June appeared first on Motley Fool Australia.

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