Allegro's Q3 Growth Outlook Sparks Share Price Drop
Allegro's Weaker Q3 Growth Predictions Impact Share Prices
Shares of Allegro (WA: ALEP) experienced a notable decline recently after the company projected a slowdown in its earnings growth for the upcoming third quarter. The announcement came as a surprise to investors, as many were expecting more robust performance.
Current Market Reactions
Trading showed a sharp response on the charts, with Allegro shares falling by 7.8% and hitting PLN 35.70. This downturn reflects investor concerns over the company's guidance, which highlights a reduction in growth expectations.
GMV Growth Expectations
The company has indicated that Polish Gross Merchandise Volume (GMV) growth is expected to slow to a range of 10-11%. Previously, analysts were anticipating a more optimistic growth rate of around 12%. This adjustment has certainly raised eyebrows in the market.
Forecasts on Revenue and EBITDA
Revenue growth expectations are also underwhelming, with projections set between 16-18%, below the 19% predicted by analysts. Furthermore, Allegro anticipates its adjusted EBITDA growth in Poland to decelerate to 11-13%, significantly trailing the previous market expectation of 15%.
Consolidated Guidance Insights
At the consolidated level, Allegro’s GMV growth guidance reflects a range of 9-10%, which again undershoots the market’s expectations of 12%. Revenue growth is now expected to fall between 8-10%, compared to the 12% that analysts had forecasted. Adjusted EBITDA growth guidance is also disappointing, with estimates at 5-8%, while the market had previously looked for a 12% increase.
Analysts' Perspectives
Market analysts have provided mixed insights regarding Allegro's performance. J.P. Morgan noted that profit-taking could occur, as it seems earnings growth has peaked, leaving little immediate upside to the forecasted FY24 expectations. The concern is further amplified by the losses in international operations that have yet to stabilize.
Second Quarter Results Overview
Despite the sober outlook for Q3, Allegro reported a second quarter that exceeded expectations. The Polish GMV for this period experienced a year-over-year growth of 12%, totaling PLN 15 billion, which was slightly above both the company's guidance and market consensus.
Impressive EBITDA Numbers
Allegro's adjusted EBITDA in Poland reached PLN 908 million, representing a remarkable 35% increase from the prior year, and surpassing both consensus forecasts and the company's earlier guidance, which had projected a growth of 26-29%.
Challenges Ahead
On a broader scale, the consolidated adjusted EBITDA for Allegro stood at PLN 763 million, marking a 32% surge year-over-year, which again exceeded market forecasts. However, the company's international ventures reported an adjusted EBITDA loss of PLN 145 million, consistent with market expectations set at a PLN 138 million loss.
Outlook After the Q2 Performance
While the second quarter results were strong, the weaker guidance for the third quarter is expected to result in consensus downgrades. Analysts at UBS have indicated that the solid performance shown in Q2 might not be enough to offset the concerns raised by the upcoming guidance.
Frequently Asked Questions
What caused the decline in Allegro's share price?
The drop in share price was primarily due to Allegro's forecast of slower earnings growth for the third quarter, which fell short of market expectations.
How is Allegro's GMV growth expected to perform?
The company anticipates Polish GMV growth to decelerate to a range of 10-11%, lower than the previously expected 12%.
What are the projections for Allegro's revenue growth?
Revenue growth is forecasted to fall between 16-18%, which is below analysts' earlier expectations of 19%.
What did analysts say about Allegro's overall performance?
While the second quarter performance was strong, analysts are concerned that the weakened guidance for Q3 may lead to consensus downgrades.
How did Allegro perform in Q2?
In its second-quarter results, Allegro reported a 12% increase in Polish GMV and a 35% rise in adjusted EBITDA year-over-year, exceeding market expectations.
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