The last time I reviewed Moonpig (LSE:MOON) shares, I decided that I would keep the shares on my watch list. Nearly 10 months later, let’s take a closer look at the FTSE 250 incumbent once more to see if anything could change my stance.
Online greeting cards and gifts
As a reminder, Moonpig is an online-only greeting cards and gifts business based in the UK. The premise is that you can craft a greeting card for loved ones, customise it, and send it directly to them. I must admit I use online greeting cards a lot, including Moonpig’s services, due to the ease and the customisation element.
It is worth remembering that Moonpig shares only became available in February 2021 via an initial public offering (IPO). The IPO price was 423p. As I write, the shares are trading for 159p, which is a 62% decline over approximately 18 months. Over a 12-month time period, they’re down 49% from 314p to current levels.
The investment case
I believe that Moonpig is a growth stock. Unfortunately for it, it is attempting to grow its business, performance, and investor sentiment against the backdrop of economic volatility. This is partly the reason for the share price drop, in my opinion.
So let’s take a look at Moonpig’s annual report for the period ended 30 April 2022, released back in July. It was a mixed bag for me, but it did report that overall it was happy as a business that it was headed in the right direction.
Revenue dropped slightly compared to 2021, as did gross profit. Order numbers also dropped. From a bullish perspective, it said that it had managed to cut costs, previously linked to technology and infrastructure implementation, and had also managed to increase its market share in the online greeting card market.
As part of reviewing any stock I am looking to buy, I refer to previous performance. I note that Moonpig’s 2021 performance was exceptional. I believe this may have been a tad over-inflated due to the restrictions in place due to the pandemic. Perhaps 2022 results are a more accurate reflection of where the business is currently at.
At the moment, macroeconomic headwinds are affecting many FTSE 250 stocks. Moonpig is not immune to these issues, which include soaring inflation, the rising cost of raw materials, as well as the global supply chain crisis. Rising costs for a business like Moonpig threaten levels of profitability. Supply chain issues could affect its ability to deliver certain products to its consumers. I believe some of these issues have affected its most recent results.
A FTSE 250 stock I will continue to watch
In conclusion, I have decided to maintain the same stance as the last time I reviewed Moonpig shares. I will keep them on my watch list for now. Current headwinds, as well as increased competition in the market help me come to my decision. I believe there are better stocks out there for me to add to my holdings right now.