Purple Innovation, Inc.

PRPL Details

Purple Innovation, Inc. (NASDAQ: PRPL) creates and manufactures a wide range of creative, branded, and premium comfort goods, such as mattresses, pillows, cushions, bases, sheets, and other bedding items. It advertises and distributes its products through direct-to-consumer (DTC) online channels, retail brick-and-mortar wholesale partners, retail showrooms, and third-party online retailers. It is a digitally native vertical brand with a focus on comfort product innovation and luxury products.

Management Change: On August 24, 2021, PRPL stated that Mr. Craig Philips stepped down as Chief Financial Officer (CFO), effective August 31, 2021. While a search for his replacement is ongoing, PRPL has hired Mr. Bennett Nussbaum as temporary CFO. Mr. Nussbaum has over 45 years of experience and has previously held the positions of CFO at Pepsi-Cola International, Burger King, and FedEx Office.

Opening of Manufacturing Facility: PRPL announced that it celebrated the formal grand opening of its newest production site in Henry County on August 04, 2021. With the installation of more Mattress MaxTM Machines, Purple's proprietary production manufacturing equipment, the firm will boost its production capacity.

H1FY21 Results: The company increased 28.37% in revenues to USD 369.02 million during H1FY21 (ended June 30, 2021) compared to USD 287.47 million during H1FY20, due to an increase in volumes across both DTC and wholesale partner sales channels. As a result, it witnessed a rise in net income (attributable to its shareholders) to USD 23.40 million during H1FY21 vs. a net loss of USD 76.44 million reported in H1FY20. As of June 30, 2021, PRPL had cash and cash equivalents of USD 110.08 million with a total debt of USD 42.41 million.

Key Risks: PRPL's one unique client accounted for 15% of its net sales and 79% of its account receivables in FY20. As a result, losing such important clients might harm the company's financial condition. Furthermore, PRPL works in a competitive comfort business and confronts direct competition from larger competitors with excellent financial and operational capabilities. As a result, competitors' pricing pressure or improved product development might impact its market share and impair its financial performance.

Outlook: PRPL estimates its FY21 total sales to be in the range of USD 820 – 850 million, representing a YoY growth of 26% – 31%, with an adjusted EBITDA of USD 78 – 88 million as of August 09, 2021. Due to the inventory restrictions that are likely to continue until late August, the firm expects Q4FY21 to account for a significant portion of its sales increase in H2FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PRPL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: PRPL's stock price has fallen 43.18% in the past nine months and is currently trading in the lower band of its 52-week range of USD 19.99 to USD 41.08. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.36. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 25.24. Considering the significant correction in the stock price, reasonable balance sheet, boost in capacity utilization, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 20.55, up 1.48% as of October 14, 2021, 11:09 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Leju Holdings Limited

LEJU Details

Leju Holdings Limited (NYSE: LEJU) is China's leading real estate and home furnishing e-commerce and online media platform, offering real estate e-commerce, online advertising, and online listing services. Its comprehensive digital platform includes a variety of mobile applications and local websites spanning over 380 cities, which are supported by complementing offline services to ease residential property transactions. LEJU also handles SINA Corporation's real estate and home furnishing websites and works closely with Tencent Holdings Limited, a Chinese global technology conglomerate holding firm. As of October 14, 2021, LEJU has 136.80 million American Depository Shares (ADS) listed and outstanding (each ADS representing one ordinary share).

Change in Management: On August 31, 2021, LEJU announced that Mr. Minyi Zhang had been appointed as the new director to succeed Ms. Juhong Chen, effective August 31, 2021. He was the General Manager of Tencent Marketing Solution's Vertical Sales & Operation Department, where he was in charge of overall strategy and growth.

H1FY21 Results: The firm reported a 7.64 % rise in total net revenues to USD 301.09 million during H1FY21 (ended June 30, 2021) compared to USD 279.72 million during H1FY20, owing mainly to an increase in the number of discount coupons redeemed and secondary real estate broker demand. However, it witnessed a net loss of USD 46.89 million during H1FY21 compared to a net income of USD 1.93 million reported in H1FY20, owing primarily to the provisioning of bad debts. The company's cash and cash equivalents (including marketable securities) were USD 321.88 million as of June 30, 2021, with no outstanding debt.

Key Risks: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. This came after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Furthermore, a sizable portion of LEJU's revenue comes from Chinese metropolitan areas like Beijing, Hainan, Guangzhou, and Ningbo. During FY20, these regions accounted for about 38% of the company's total revenue. As a result, if the real estate market or internet advertising suffers a setback in any of these locations, demand for LEJU's services may decline significantly, thereby hurting its financial position.

Outlook: LEJU stated in its H1FY21 press release that revenues for H2FY21 are projected to be in the range of USD 300 – 310 million, roughly flat compared to its H1FY21 revenues. This estimate is based on the company's current and preliminary evaluation, which is subject to change.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LEJU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LEJU's share price has fallen 58.00% in the past nine months and is currently close to the lower end of its 52-week range of USD 1.02 to USD 3.97. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 32.08. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 1.30. Considering the significant correction in the stock price in the past nine months, the increasing demand for digital services, strong balance sheet, and the associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.05, traded flat as of October 14, 2021, 12:46 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.