Why The Allbirds IPO Buzz Doesn't Make It A Buy

At first, this might all sound like posturing. But the product is gaining traction with big names like Leonardo DiCaprio, Barack Obama, and Matthew McConaughey so far. DiCaprio is a longtime environmental advocate and was even an early investor in Allbirds. The shoes have earned a cult following as a result.

So, it came as no surprise when the company breached $1 billion valuation - $1.4 billion, in fact - after a 2018 fundraising round. That made it a "unicorn" startup. This was around when people were starting to get excited about Allbirds. It has since lived up to the hype. But for all the sustainability talk - can Allbirds sustain its brand to the IPO and beyond?

Is Allbirds Profitable?

For starters, Allbirds is not yet profitable - not that it should expect profitability this early in the game. The sustainability story and fast global growth still attract investors. Still, many shrewd investors won't budge on a "story stock" until they see some hard numbers to support the hype. And you can't blame them - investing in an unprofitable company is risky.

This is especially the case amid a pandemic, where the market seems to gravitate increasingly to the bare essentials rather than fashion. Allbirds did not fare well in 2020, growing its net loss from $14.5 million in 2019 to $25.9 million.

So far in 2021, Allbirds is still more than $20 million in the red. Despite this, Allbirds continues to make headlines, which is also not surprising. Companies that come across as more mission-driven than profit-driven tend to do well in the headlines. Duolingo Inc. (DUOL) and Honest Co. Inc. (HNST) come to mind. Both had IPOs this year.

The difference between DUOL and HNST, though, was that one delivered the numbers, and the other didn't. Duolingo is, in fact, profitable. Honest Company is not. And this certainly played a role in Duolingo stock climbing 68% post-IPO, versus Honest losing more than half its share price. Profits matter; there's no way around it.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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