This FTSE 250 stock is down over 20% in 6 months! Is it an opportunity?

Jabran Khan delves deeper into a FTSE 250 stock which has dropped recently. Could an update today provide insight as to whether it is an opportunity?

| 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.

macro shot of computer monitor with FTSE 100 stock market data in trading application

Image source: Getty Images

FTSE 250 incumbent Moonpig (LSE:MOON) has seen its share price drop in the past six months. At current levels, is there an opportunity for me to pick up cheap shares for my portfolio? Let’s take a look.

Greeting cards giant

Moonpig is an internet-based greeting cards, gifts, and flower business. The rise in tech has seen the greeting cards market move online where consumers can pick, personalise, and directly send a greeting card, a gift, or flowers, to a loved one.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

As I write, shares in Moonpig are trading for 380p, whereas six months ago shares were trading for 21% higher at 487p. Moonpig shares are down 7% over a 12-month period overall as they were trading for 410p this time last year.

I believe Moonpig’s share price has been detrimentally affected by recent performance linked to macroeconomic issues and pressures.

Bearish attitude

There are a few factors that are putting me off Moonpig shares right now. Firstly, performance has dropped from 2021 levels, which is worrying. The FTSE 250 incumbent released an interim report today for the six months ended 31 October. It showed that revenue and profit were 8.5% and 30.6% less than the same period last year. There were some positives which pointed towards a higher customer base and a new record for attached gifting levels. This is when a consumer attaches a gift to a card when making a purchase. Furthermore, debt levels did decrease too.

Debt is a major concern for me. Moonpig shares only debuted on the London Stock Exchange in February and the share price has been quite volatile since then. Debt levels are quite high and Moonpig points towards “technical reasons” which usually means technology-related cost and infrastructure needed to run an online-only business.

Competition in the online greeting sector is getting intense. Other major players in the market are vying for the same customer base. Funky Pigeon is one such competitor.

The rise in cases and the new Omicron variant will worry consumers as, after all, greeting cards are a discretionary or luxury expense. If cases rise and restrictions come into force, consumers may be worried about their pockets and steer clear of non-essential spending.

Finally, rising inflation and costs are a worry for all businesses and Moonpig is not exempt. Rising costs can affect margins and investor returns and if these costs are passed on to its customers, the same customers could look for cheaper alternatives. 

A stock I’m avoiding

At current levels and the current state of play, I would not buy Moonpig shares. Despite its cheapened share price, for me the negatives outweigh any positives the firm does possess. It is worth noting that some of the issues could be short term. These include Covid-19 implications and rising inflation. I believe 2021 performance was over-inflated due to the pandemic. This led to people keeping in touch using technology. I personally used online greeting cards when I wasn’t able to see my friends and loved ones while in lockdown. I will keep an eye on developments.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Jabran Khan 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.

More on Investing Articles

A person holding onto a fan of twenty pound notes
Investing Articles

3 top dividend shares to beat a new recession

I believe that good dividend shares are my best approach to keeping my money safe in a recession. Here are…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 80%, this growth stock is a ‘no-brainer’ buy

Growth stocks have faced a torrid time recently. However, after falling 80% since its highs, this FinTech looks too cheap…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett is pouring money into stocks! Here’s a FTSE 100 pick I think he’d buy

Warren Buffett has been investing in several US stocks recently. Here's a FTSE 100 stock I think he'd also be…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

Is the Rolls-Royce share price on the verge of recovery?

A recent trading update showed the company is benefiting from increased flying hours, so will the Rolls-Royce share price soon…

Read more »

Girl showing thumb up, excited about upcoming shopping
Investing Articles

Is now a good time to buy Tesco shares?

After a strong rally last year, the Tesco share price has stalled. Roland Head gives his view on investing in…

Read more »

The BT Tower looming above London's skyline
Investing Articles

3 reasons to buy – and not buy – BT Group shares

The BT Group share price has a rock-bottom valuation right now. Is this a red flag or does it make…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

2 cheap FTSE 100 dividend shares! Should I buy?

These two FTSE 100 dividend shares offer terrific value for money, on paper. Should I load up on them today,…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

5 steps to target a monthly £300 passive income

With his eyes on a target of monthly passive income, here are five steps our writer would take to try…

Read more »