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Is the Kogan.com (ASX:KGN) share price a buy on surging sales?

Is the Kogan.com (ASX:KGN) share price a buy after reporting surging sales? 

Is the Kogan.com (ASX: KGN) share price a buy after reporting surging sales?

Kogan.com is an online business that was set up by Ruslan Kogan in 2006 in his parent’s garage. Kogan.Com offers a variety of products and services including Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel. The company plans to launch Kogan Super in the near future. Kogan.Com aims to offer consumers price leadership through digital efficiencies.

What did Kogan.com announce?

The online retailer provided a business update for April 2020. It revealed it added 139,000 active customers during the month to reach 1.95 million people.

That growth and the restrictions in physical shopping saw gross sales grow by over 100%. Gross profit jumped by over 150% and ‘adjusted EBITDA‘ rocketed higher by more than 200%.

Kogan.com’s strong April performance has meant that financial year to date adjusted EBITDA to April 2020 is showing growth of over 40%.

However, this growth has come at a cost with Kogan.com investing in building the business and growing active customers. In April Kogan.com spent the most on marketing in a single month.

The company also announced that its Remuneration Committee has proposed to introduce a Long Term Incentive plan for Executive Directors Ruslan Kogan and David Shafer.

The exercise price for the options would be the (volume weighted) average price of the shares in the three months to 30 April 2020. Mr Kogan and Mr Shafer will get 3.6 million and 2.4 million options respectively, but they can’t resign prior to the approval of the FY23 financial report.

Is the Kogan.com share price a buy?

Kogan.com has been a strong performer since the worst of the market sell-off. But has this strong growth been driven by just the short term shutdown? Or has it caused many customers to shift to online shopping?

In response the Kogan.com share price has risen 6.8%. At around $9 I don’t think it’s an obvious buy like it was a few weeks ago. But it’s one to watch, even if there are few factors that aren’t that great. These tech shares could be better:

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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.

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