There’s no gentle way to say it. Allbirds stock is in trouble. The company has struggled since its November 2021 IPO, and it is perilously close to dropping below $1 per share. That threshold is key, as an extended period below $1 per share may result in delisting from the Nasdaq.
Allbirds (NASDAQ:BIRD) went public when the market was booming, and tech stocks were at all-time highs. Shares were originally priced at $15, and the very first trade of Allbirds stock came in at $21.21. By the end of the trading day, Allbirds stock was up 91 percent at $28.64.
After the successful debut, investors had high hopes for the future of Allbirds – but their enthusiasm was short-lived. By mid-December 2021, the stock traded below $14 per share, and aside from a few small, brief spikes, Allbirds stock has dropped steadily ever since.
What does Allbirds do? And why did Allbirds stock go down? More importantly, will Allbirds stock recover?
How AllBirds Became a Hollywood Darling
Allbirds has definitely shattered the myth that top-notch design, creature comfort, and earth-friendliness can’t co-exist in fashion. This brand isn’t just talking the talk; it’s walking the walk—literally. As a certified B-Corp, Allbirds takes eco-consciousness to heart, from the sustainable fibers in their trend-setting kicks to their apparel that’s kind to Mother Earth.
So why did Allbirds stock soar like a hawk on its Nasdaq debut? Well, it didn’t hurt that Barack Obama was spotted sporting their environmentally-friendly wool sneakers. And it’s not just Obama; Silicon Valley’s elite have made Allbirds their unofficial office footwear.
But it’s not just tech gurus getting in on the action. Hollywood A-listers like Ben Affleck, Cindy Crawford, Mila Kunis, and Ashton Kutcher have all been snapped wearing Allbirds. And guess what? Their fan bases paid attention—and started hitting the “add to cart” button.
You’d think Allbirds would naturally vibe with Millennials and Gen Z, groups typically more eco-conscious than their predecessors. So when Allbirds became a hit with these younger folks, everyone thought the brand was destined for the stars. But life had other plans, proving that predicting success in business is never a walk in the park—even in comfy shoes.
Why Did Allbirds Stock Go Down?
A look at earnings statements shows why Allbirds stock has declined month after month and quarter after quarter. Essentially, revenue is falling, and the company isn’t remotely poised to achieve profitability in the foreseeable future.
Though Allbirds exceeded expectations for second-quarter 2023, it’s hard to celebrate. Analysts forecast revenue of $66.8 million for the three-month period ending June 30, 2023, and the company reported net revenue of $70.5 million. That sounds like a win, but the trouble is that $70.5 million is still $9.8m lower than the same period in 2022.
Allbirds explained that the decline in revenue was caused by lower average selling prices for its products. Between third-party sales and promotional activity, customers paid less for Allbirds shoes and clothing, and that’s not a good sign. The downward pressure on prices suggests lower demand – and that the Allbirds brand has fallen out of fashion. If the Allbirds trend has fizzled, the shoes may never sell for premium prices again.
Allbirds is working hard to turn things around, as evidenced by a substantial 24 percent drop in inventory and improvement in gross margin for the quarter. The bad news is that Allbirds is still losing money. The company reported a net loss of $28.9 million for the second quarter, which breaks down to a loss of $0.19 per basic and diluted share.
Some growth companies can hang on, even after 20 consecutive quarters of negative operating income like Allbirds. However, the companies that survive lean times and go on to become profitable typically show signs of improving financials. Allbirds hasn’t done that – and that’s not the worst of it. If store leases are considered in the debt category, Allbirds may have already crossed into bankruptcy territory.
Will Allbirds Stock Recover?
Allbirds is at a pivotal juncture and the road ahead looks fraught with challenges. When you dig into the financials, the picture isn’t pretty. Arguably, the company’s shining star is its brand image, a green beacon that’s made it synonymous with sustainable style.
But let’s face it, a strong brand won’t pay the bills when you’re navigating rough financial waters. Add to that a media narrative that’s starting to chip away at the company’s eco-friendly luster, and you’ve got a recipe for trouble. Remember when Allbirds were the go-to kicks for Silicon Valley’s brightest minds? Well, that love affair is cooling off, and the biggest culprit appears to be a dip in product quality.
Consumers who once proudly donned Allbirds have started to drift toward other brands, enticed by an ever-growing market of eco-friendly alternatives. A flurry of customer complaints about product durability isn’t helping Allbirds’ cause either. Combine this with the company’s already shaky financial health, and you get an investment that’s high-risk, to put it mildly.
Bottom line, Allbirds is on shaky ground, and its difficulties in raising capital could be the final nail in the coffin. As it stands, a comeback for Allbirds stock seems like a long shot.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.