What Happened?
Shares of cash-back rewards platform Ibotta (NYSE: IBTA) jumped 9.7% in the afternoon session after rebounding from a steep sell-off the previous week, as investors appeared to buy the dip in what could be a technical bounce or short squeeze.
The rally follows a more than 31% plunge last week after the company's second-quarter earnings and revenue fell short of analyst expectations, leading to several downgrades. Despite the poor results, which showed a 2% year-over-year revenue decline, some investors may see a contrarian opportunity in the beaten-down shares. The company remains profitable, generated $18.9 million in free cash flow in the last quarter, and has an active $100 million share buyback program. Additionally, with short interest representing over 15% of the stock's float, the sharp upward move could be amplified by short-sellers buying shares to cover their positions, a phenomenon known as a short squeeze.
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What Is The Market Telling Us
Ibotta’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.6% on the news that stocks continued to rally as investor optimism grew for a potential Federal Reserve interest rate cut in September. This optimism was largely fueled by a recent consumer price index report that showed inflation easing, along with public comments from Treasury Secretary Scott Bessent advocating for a significant 50-basis-point rate cut. The prospect of lower borrowing costs tends to boost rate-sensitive sectors like Business Services, as it can encourage companies to increase spending on consulting, IT projects, and staffing.
Ibotta is down 60.8% since the beginning of the year, and at $26.15 per share, it is trading 66% below its 52-week high of $76.89 from October 2024. Investors who bought $1,000 worth of Ibotta’s shares at the IPO in April 2024 would now be looking at an investment worth $253.22.
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