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Unusual Calls Bought in Small Footwear Company Trading Cheap

by | Jul 10, 2022

Allbirds (BIRD) a popular footwear company that came public at the worst possible time and shares -67% YTD but rallied 30% last week off lows and on 7/8 saw an unusual block of 10,000 December $7.50 calls bought for $0.55 with earnings seen around August 9th. BIRD insiders bought $360K+ of stock in March and May in the $4.86 to $5.17 range. Allbirds is a global lifestyle brand that innovates with naturally derived materials to make better footwear and apparel products with more than 60 products across Footwear and Apparel. Footwear has historically represented the vast majority of revenue and has been the foundation of the brand. BIRD has a market cap of $690M and trades 2.4X Sales with revenues seen rising 22.6% this year and 20-25% each of the next three years forward while profitability not expected until 2025. BIRD also now trades just 2.88X cash with no debt which could make it an attractive M&A target. BIRD remains confident in its ability to achieve medium-term targets of 20% to 30% net revenue growth, gross margins north of 60% in direct vertical channels and adjusted EBITDA margins in the mid- to high teens. Margins are seen benefitting from strong pricing power, the continued introduction of new higher-margin products and the easing of at least a portion of the 450 to 500 basis points of logistics cost headwinds. Analysts have an average target of $9.50 and short interest lower by 36% Q/Q to 6.5% of the float. Baird has a $10 target seeing demand strength and International headwinds transitory with a strong long-term opportunity.

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