Figs stock has lost momentum and remained in a consolidation phase in almost two years. It remained inside the support and resistance levels at $4.42 and $6.97 in this period, missing the strong stock surge in the United States. It was trading at $6.25, valuing the brand at over $1.12 billion.
Strong brand facing headwinds
Figs is an apparel company that focuses on the healthcare sector. It is a direct-to-consumer brand that sells all types of healthcare apparel to nurses and doctors nationwide.
This large industry in the US has over 22 million healthcare and social workers, a figure that will continue growing as the population ages. The healthcare apparel industry is estimated to be worth over $12 billion.
Figs has attracted many customers over the years. According to its 10k statement, it served over 1.2 million in the US.
The biggest challenge Figs faces is competition in the industry. Its competitors include firms like Scrubs & Beyond and Uniform Advantage, as well as mass-market retailers and wholesalers.
Figs’s business has continued growing in the past few years. In 2019, it generated over $110 million in annual revenue, and in 2023, it generated $545 million. This growth happened as it increased its marketing budget and brand awareness.
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Recently, however, there are signs that its business is slowing, likely because of the substantial competition. Figs number of customers rose by 4% to 2.6 million in the trailing twelve months as the net revenue per user fell by 3% to $205. The average order value also dropped by 5% to $108. These numbers explain why the Figs stock price has not done well this year.
Additionally, Figs revenue retreated by 1.5% to $140 million in the third quarter, while its gross margin continued deteriorating. Figs blamed this trend to increased discounts as competition rose. The most recent numbers showed a gross margin of 67.1%, lower than the 68.4% in Q3’23. This figure has been downward after peaking at 72% in FY’20.
Analysts are pessimistic in the company as it faces substantial challenges. The average estimate is that Figs revenue will be $543 million in 2024, followed by a small increase of 3% to over $559 million in 2025.
The other key challenge is that the company is fairly overvalued, as its forward P/E ratio is 350. On the positive side, the firm has a strong balance sheet, with over $281 million in cash and short-term investments.
Figs stock price analysis
The daily chart shows that the Figs share price bottomed at $4.42 in 2024. It failed to move below that level several times since April, a sign that short sellers were not comfortable placing trades below that point.
The stock then found a big barrier at $6.97, its highest swing in July and October of that year. It has moved slightly above the 50-day moving average, while the Percentage Price Oscillator (PPO) has moved above the zero line.
There are signs that the accumulation and distribution indicator is rising and has remained above the ascending trendline that connects its lowest swings since February.
Therefore, while its fundamentals are not good, it will likely have a strong comeback in 2025. If this happens, the stock may jump to the next important resistance level at $10.25, which is about 66% above the current level. This is an important price since it is along the highest swing in February 2023.
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