The Kogan.Com Ltd (ASX: KGN) share price has had a spectacular rise of around 75% from $3.40 at the beginning of the year to a high of $5.93 at the close of trading on Thursday, with the share price particularly strong off the back of it’s March 2019 quarter update.
Despite the strong price rise, could it be time to take profits and sell?
Similar Business Model To Amazon
Kogan is like Amazon in that it operates on extremely low margins, it had just $10.2 million operating profit on $232 million revenue in its half-year results, an operating margin of 4.4%. This indicates to me that it may not have any real competitive advantage.
The launch of Kogan marketplace could also be viewed as a response to Amazon Inc (NASDAQ: AMZN) entering Australia. While Kogan and Amazon could potentially co-exist as competitors, I am finding it hard to justify backing Kogan to survive long-term against the global behemoth Amazon.
Kogan Founders Cashing Out
Initial Public Offerings (IPOs) are a way for founders to cash out and exit the business.
With the two founders, Ruslan Kogan and David Schafer having repeatedly sold shares since listing, including 6 million shares in June 2018 due to “personal financial commitments” and a further sale of a further 6.25 million shares in September 2018, one could be forgiven for thinking they are headed for the exits.
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Disclosure: At the time of writing, Andrew does not own shares in any of the companies mentioned.
