Is Qurate Retail a Buy Under $10?

Qurate Retail, Inc. (QRTEA) is an Internet retail-based company engaged in video and online commerce in North America, Europe, and Asia. The Englewood, Colo.-based concern markets and sells various consumer products, primarily through live televised shopping programs, internet, and mobile applications. The stock gained 3.8% in price intraday to close yesterday’s trading session at $10.02, which was 31.5% below its 52-week high of $14.62. But QRTEA has slumped 18.1% over the past six months and is currently trading below its 50-day and 200-day moving averages.

Digital’s share of total retail sales has grown incrementally over the last year as people became more comfortable with online purchases amid stay-at-home restrictions. Also, with the economy’s reopening and increased consumer spending, both brick-and-mortar and online sales are expected to benefit from pent-up demand. E-commerce growth is projected to be 17.9% in 2021. However, the favorable industry trends were not  reflected in QRTEA’s financials in its last reported quarter. For the third quarter, ended September 30, QRTEA reported  $3.14 billion of revenue, representing a 7% decline year-over-year. Its adjusted net income declined 48% from the prior-year quarter to $123 million. In addition, its adjusted EPS decreased 46% year-over-year to $0.30, missing the $0.49 consensus estimate by 38.8%. David Rawlinson, President and CEO of QRTEA, stated, “Supply chain constraints and cost inflation are impacting our entire industry, and we have taken action to help mitigate the potential impacts.”

Retail e-commerce sales in the U.S. are expected to grow to 23.6% of all sales by 2025, representing a 13.7% change year-over-year, and its highest growth prediction yet. The industry trends and the company’s strategic plans and initiatives should enable the company to drive growth in the long run.

Click here to check out our E-commerce Industry Report for 2021

Here is what could shape QRTEA’s performance in the near term:

Reasonable Valuation

In terms of forward P/E, QRTEA is currently trading at 5.38x, which is 69.4% lower than the 17.54x industry average. Also, its 0.27 forward Price/Sales ratio is 79.5% lower than the 1.30 industry average. In addition, the stock’s forward EV/Sales and EV/EBITDA of 0.82x and 5.58x, respectively, are substantially lower than the  1.48x and 10.40x industry averages.

Mixed Analysts Estimates

Analysts expect QRTEA’s revenues to increase 2.3% in the current year and marginally in the following year. However, its revenue is expected to decline 1.7% year-over-year to $4.38 billion in the current quarter. The company’s EPS is expected to decrease 56% in the current  quarter and 29.2% in the next quarter. But the Street expects QRTEA’s EPS to rise 2.4% year-over-year to $2.16 in the next year.

Mixed Profitability

QRTEA’s 14.83% EBITDA margin is 15.5% higher than the 12.84% industry average. Also, its 8.46% and 11.15% respective net income and EBIT margins are 29% and 16.8% higher than the 6.56% and 9.54% industry averages.

However, QRTEA’s 2.96% and 34.43% respective  FCF  and gross profit margins are  55.2% and 3.8% lower than the industry averages. Also, its 1.81% Capex/Sales is 21.6% lower than the 2.31% industry average.

POWR Ratings Reflect Uncertain Prospects

QRTEA has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Quality, which is consistent with its mixed profitability.

QRTEA has a D grade for Growth. The company’s weak financial performance in its last reported quarter justifies this grade.

Of the 37 stocks in the Internet – Services industry, QRTEA is ranked #17.

Beyond what I have stated above, one  can also view QRTEA’s grades for Value, Sentiment, Momentum, and Stability here.

View the top-rated stocks in the Internet – Services industry here.

Bottom-Line

Although QRTEA is currently trading at a discount, the company’s near-term prospects look uncertain. The company reported lower earnings in its last reported quarter, and analysts expect further declines in the current quarter. However, favorable industry trends and QRTEA’s strategic growth initiatives should drive the company’s long-term growth. So, we think it could be wise to wait for a better entry point in the stock.

How Does Qurate Retail, Inc. (QRTEA) Stack Up Against its Peers?

While QRTEA has an overall POWR Rating of C, one might want to consider looking at its industry peer, Liquidity Services, Inc. (LQDT), Cimpress N.V (CMPR), and Criteo S.A. (CRTO), which has an A (Strong Buy) rating.

Click here to check out our E-commerce Industry Report for 2021

QRTEA shares were trading at $10.25 per share on Tuesday afternoon, up $0.23 (+2.30%). Year-to-date, QRTEA has declined -6.56%, versus a 25.90% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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