Temple & Webster Group Ltd (ASX: TPW) Updates Guidance, Achieves Meme-Stock Status

A few weeks ago I outlined my thesis for investing in Temple and Webster Group Ltd (ASX: TPW) as a pandemic momentum trade — largely because the business (which sells online) would benefit from social distancing.

Sadly I sold my shares right before they went on to gain another 25% or so (assuming the pop again today).

Today, the company announced that its year to date EBITDA is $7.1 million. It earned $2.3m in the first half, so assuming the rest of June remains strong, I reckon you could safely model an EBITDA run rate of $10m.

Now let’s bump that up a further 20% just to be bullish and assume that it is on an EBITDA of $12m, and growing strongly.

The current enterprise value is at least $550 million, so that means the EV/ EBITDA of this online retailer is about 45. Fairly hefty by any measure.

In comparison, Kogan.com (ASX: KGN) announced it is doing “Adjusted EBITDA across 4QTDFY20 was $7.0m per month,” which would translate to $84m in EBITDA which means it is trading on a substantially lower EV/EBITDA multiple given its market capitalisation of about $1.45b.

Any way I look at it now, it feels like my Temple and Webster thesis has played out. This is definitely now a hot stock with funds falling over themselves to get on board. Once again, I have sold a hot stock so far from its share price peak, that I feel stupid, despite having made a profit.

But at the end of the day, in terms of medium term and long term positioning I still feel good about my strategy of concentrating my portfolio in the healthcare industry and in growing software companies.

When it comes to retail, I am obviously suffering some value investing issue and am in need of re-education, because I did not hold this pandemomomania trade long enough!

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