Should I invest in AIM stock Moonpig after sales soar?

Is AIM stock Moonpig a good long-term investment? The e-commerce group is enjoying pandemic boosted sales success, but will it last?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Moonpig (LSE:MOON) is a recently-listed AIM stock that operates an online marketplace for personalised greetings cards. It’s well known and over the past two decades has amassed a market share three times bigger than its nearest competitor. Is it a viable long-term investment though?

Lockdown beneficiary

Moonpig’s recent growth has undoubtedly come from the pandemic-induced lockdowns. It floated to a warm analyst reception, with many rating it a buy. The company has a market cap of £1.4bn and listed on 2 February at £4.40 a share. Since then, the Moonpig share price has reached a high of £4.72 but has fallen back to £4.20.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

While the group has benefited from the temporary stay-at-home economy, I think it will continue to have a bright future ahead. It ultimately takes the hassle out of physically choosing and posting a card, so repeat custom accounts for 78% of its revenue. Moonpig has built and maintained a strong position in the UK and the Netherlands.

Prior to Valentine’s Day 2021, the group enjoyed its strongest trading week ever. Along with an increase in orders, it’s seeing a notable increase in average order values too. That’s due to a rise in customers attaching gifts to their card orders.

I personally know a lot more men than women who use Moonpig out of convenience, particularly when working away from home. I think this indicates a hold on a niche market that could remain sticky.

Competitive arena

However, there are risks to the business. It’s operating in a highly competitive industry where savvy marketing is vital to keep it ahead of the game. Supermarkets are major competitors, particularly on price and convenience. The gifting market is rapidly evolving, and I think many people are going off physical gift cards for environmental reasons.

While an increase in customer orders boost revenues, it also leads to further expense as the group must invest in delivering quickly. It’s also had to increase temporary staffing levels to meet rising orders. And lockdown-related costs, such as enhanced hygiene and social distancing measures, have also raised expenses. As such it expects underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) for FY21 to roughly match FY20.

I think its sticky customer base bodes well for the future, but its forward price-to-earnings ratio is 32, so it could be considered expensive.

AIM stock risk

Buying AIM stocks comes with liquidity risk. This means there are few buyers and sellers compared with a highly liquid market like the FTSE 100. So if I buy Moonpig shares and then want to sell in a hurry, I may be forced into taking a price lower than I’d like. 

Going forward, it’s focused on enhancing its marketing activity to speed up customer acquisition and encourage further growth. It’s expectations for the full year to the end of April are to double revenues year-on-year.

I think the company does have the potential to stay strong, but there are a number of risks and ultimately the share price puts me off investing.

For regular stock market investing ideas and help choosing the best shares to buy now, sign up to The Motley Fool today.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

3 top FTSE 250 shares to buy right now

I think the FTSE 250 is offering some great dividend and growth shares at the moment. And there are plenty…

Read more »

Happy retired couple on a yacht
Investing Articles

This growth stock has seen its shares pull back! Should I buy now?

When a growth stock sees its share price drop, I look carefully to see if I could pick up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How to identify the best income shares like this one

Income shares vary in quality but this approach keeps me from making some of the worst howlers with dividend investing.

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

If I’d invested £1k in Tesla shares a year ago, here’s how much I’d have now

If Jon Smith had bought Tesla shares a year ago, he'd be in profit. But he has some concerns for…

Read more »

Twenty pound notes in back pocket of jeans
Investing Articles

Should I buy tobacco shares now for big dividends?

After a possible setback for electronic cigarettes, our writer explains why he would still buy tobacco shares for his income…

Read more »

a couple embrace in front of their new home
Investing Articles

3 FTSE shares I’m buying with the Help to Build scheme!

Last week, the government launched a new, Help to Build scheme. So, here are three FTSE shares that could benefit…

Read more »