The latest lockdown news was hardly surprising, but is nevertheless yet another hurdle for us to contend with ahead of the success of the vaccine rollout. It is of course very difficult for both investors and the businesses that we invest in, and in many ways we will once again no doubt mirror last spring with sector specific winners and losers.
Back then, amongst others, I plumped for G4M, the online retailer of musical instruments at circa £2.80p, which has been an excellent performer for me and which saw it deliver impressive Interim results in November of last year.
As a result of my buying in I have covered this one a few times here now, but having added a few more shares following those results I thought it worth taking another brief look, as although the shares have recently hit a thirty-month high and now sit at £8.00p, I believe that there is plenty more in the tank.
A trading update is due in a week or two and that should play out well with holders of the shares, as the company was already trading well running up to Christmas.
The increasing restrictions that accompanied the festive period should, I feel, have provided plenty of cheer for G4M. I am correct, then the update should pave the way for another upgrade on full year numbers.
The broker N+1 Singer had already highlighted risk to the upside and it seems quite feasible that G4M could be on track to achieve EPS closer to 40p or possibly more, rather than the current forecast of 33.7p.
As I have acknowledged before though, investors will very much be keeping an eye out for the forthcoming financial year 2022 and that is likely to be a potent factor on the share price performance going forward.
At present though, guidance from broker N+Singer is well out of date, having been based early last year on the assumption that the covid induced benefits experienced by G4M will have diminished as the first lockdown eased and a semblance of normality returned.
Clearly that hasn’t been the case and with a new lockdown which in my view will probably last well into March, then G4M is likely to see continued momentum on the sales front, not least with schools now shut.
That positive effect is increasingly likely to gain once more on the back of squeezed competition from High Street stores as they are likely to suffer further, and which should also translate into G4M strengthening its reach on an ever increasing customer base.
Additionally, any niggling issues with a no deal Brexit have been eradicated and the company looks to be in an increasingly strong position to increase its market share from its european hubs.
The metrics that have been so strong also appear to point to a positive longer term trend and with the company having already previously focused significantly on digital innovation to support growth, then it is ideally placed in what has been - and still is - an accelerated changing market place.
Selling just about anything musical from guitars to snares and decks, G4M has been demonstrating a decent performance on its own brands where margins are understandably higher as well as selling all the well known names.
However, the picture right across the board has been a positive one where it is also worth noting the increase in unique website users, which have moved from 10m in 2019 to the current rate of 15.2m.
Within that, the UK has seen an increase from 4.3m to 5.9m over that period, with Europe going from 5.7m to 8.9m, the latter proving impressive where G4M has a vast market to target with plenty of growth opportunities ahead.
Obviously only a small percentage of web users or visitors will translate into actual paying customers, but nevertheless, the numbers are moving in the right direction and building further.
The current 2021 conversion rate for the UK is at 6.11% representing a 153bps increase on the prior period, with Europe on 2.6% a 52bps jump and both have been on an upward trajectory prior to the pandemic issues.
With many customers having embraced the online offering for the first time, that migration looks likely to further firm up and increase. With the company now very much focused on margins but also enjoying increased revenue to boot, G4M looks like a business in real growth mode for the longer term with strong momentum. It will be interesting to see how the final numbers do pan out for full year 2021 and what the new guidance and tone will be for 2022. Holders of the shares shouldn’t have too long to wait with the update due on January 21st.