Farfetch’s (NYSE:FTCH) has been hit with another blow as UBS cut its price target to 80c, potentially the street low, on Thursday. This comes in the midst of current uncertainty and the looming possibility that a much-anticipated deal with Richemont (OTCPK:CFRHF) may not materialize.
Analyst Kunal Madhukar from UBS, in a note on Thursday, slashed the price target to what is likely a street-low 80c from $3.30. “We stay on the sidelines on FTCH and reduce our PT to $0.80 from $3.30 to reflect the current uncertainty and the possibility that the proposed Richemont deal may not eventuate given Richemont’s announcement that it is evaluating all options,” Madhukar, who has a neutral rating on Farfetch, wrote.
“It has been two weeks since FTCH said it would update investors in ‘due course’ after delaying its Q3 results announcement. The delay in making an announcement likely means that if there is indeed a go-private deal, it would probably be based on current share prices rather than the share price of ~$1.70, prior to the results delay,” Madhukar highlighted.
Madhukar also calculated that Farfetch (FTCH) has enough liquidity to meet its cash requirements for the next year.
The price target cut from UBS is particularly stark given Farfetch’s 18% surge in shares on Wednesday, driven by reports of the online luxury goods retailer’s efforts to secure emergency funding from private equity firm Apollo Global (APO) amidst financial turmoil.
This development is the latest in a series of setbacks for Farfetch, marked by a staggering 65% dip in its shares since November 28 as it grapples with the aftermath of its Q3 results delay and Richemont’s apparent disinterest in providing financial support or investment.
Richemont (OTCPK:CFRHF) stated that it’s “carefully” monitoring the situation and reviewing its options regarding arrangements with Farfetch (FTCH) in respect to YOOX Net-A-Porter.
Earlier this month, the struggling company faced two credit downgrades and was rumored to be exploring the sale of Browns in a bid to raise much-needed funds amid deepening concerns about its business stability.
The Seeking Alpha Quant Rating on Farfetch (FTCH) has maintained a Strong Sell or Sell status since late August, predating the dramatic share price collapse, while Seeking Alpha analysts have consistently cautioned investors against involvement with the stock.
Short interest on Farfetch (FTCH) currently stands at approximately 13% of the total float, underscoring the growing eagerness for a financial update from the beleaguered retailer.