By Sam Boughedda
Despite a 4% climb in its share price Wednesday, Allbirds Inc (NASDAQ:BIRD) stock was downgraded to Equal-Weight with a $5 per share price target by a Morgan Stanley analyst.
The analyst said in a research note that macroeconomic deterioration, slower sales growth, and a potentially longer timeline to profitability have likely pushed out the re-rating catalyst they had hoped for, and they believe the stock could remain range-bound until the path to profitability is more clear.
"Since the start of the year, we've observed a deceleration in both macroeconomic & industry-specific data points. BIRD confirmed this trend on its 2Q22 earnings report last night, & as a result, prudently cut its FY guidance. Higher macroeconomic uncertainty limits both near & medium-term visibility, & in our view makes for limited room for upward earnings revisions (even on lower levels), the #1 driver of stock price in our space," wrote the analyst.
Despite today's share price rise, Allbird's is down 77.5% in the last 12 months and 69.2% in 2022.
"This macroeconomic worsening & BIRD's subsequent revenue growth slowdown further clouds the business' path to profitability. To us, valuation re-rating is dependent on better profitability visibility. And until the path is more clear or macroeconomic volatility subsides, we fear the stock could remain range-bound for some time," added the analyst.