Burberry (LSE: BRBY), ASOS (LSE: ASC) and Blinkx (LSE: BLNX) all released trading updates today, bringing a mixed response from the market. Should you consider adding these stocks to your portfolio?
Blinkx
Online video platform Blinkx topped the risers board in mid-morning trading, with its shares soaring 23%.
After making hay for a few years, Blinkx has struggled recently as it shifts to industry growth areas of mobile, video and programmatic advertising, while managing the decline of historical product lines that have now become non-core.
Today’s Q3 trading update (covering 1 October to 31 December) told us that the company’s “revenue performance was in line with management expectations” but gave no number. The revenue performance (whatever it was), combined with cost-cutting, put profitability “ahead of management expectations, achieving break-even on an adjusted EBITDA basis during the Period”. That’s a huge improvement on a $6.8m adjusted EBITDA loss in H1.
EBITDA stands for earnings before interest, tax depreciation and amortisation and the company’s “adjusted EBITDA” also excludes “stock based compensation expense, and acquisition and exceptional costs”. Blinkx didn’t tell us its cash position at the end of the period (unlike in previous trading updates), but I think we can assume the company is still losing cash from its operations.
Today’s update certainly paints a brighter outlook and the market clearly likes it, but I would be inclined to wait for the detailed full-year numbers before considering investing.
ASOS
Online fashion retailer ASOS updated on trading for the four months to 31 December, and its shares have ticked modestly lower to around 3,100p.
The company reported revenue of £460m for the period, up 23% (27% at constant exchange rates). The number of active customers increased by 18%, and the average order frequency, average basket value and number of orders also increased. A modest decline in retail gross margin isn’t a concern when the payoff is strong growth in number of customers and revenue.
ASOS trades on a sky-high forward price-to-earnings (P/E) ratio of 57, but I’ve written before that I believe this cash-rich company with a long “growth runway” could be a great buy in spite of the high earnings rating. I stick by that view after today’s trading update.
Burberry
Luxury fashion house Burberry’s Q3 trading update (for the three months to 31 December) contained mixed news, and its shares are little changed at 1,112p.
The company reported a “tougher environment than expected” in Q3. Comparable sales were unchanged from the same period in the previous year, although improved from a Q4 decline of 4%.
Hong Kong (comparable sales down over 20%) and Macau continued to be a drag on performance, but perhaps surprisingly, mainland China returned to growth. Elsewhere in the world there were positive performances, with digital sales outperforming in all regions.
The outlook for luxury remains uncertain for the moment, but Burberry’s timeless British fashion offering has great appeal worldwide, and I believe the company has a bright long-term future. The short-term outlook has sent the shares down more than 40% from their 52-week high, and Burberry looks very buyable to me on a forward P/E of 15.