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Is Qurate Retail Stock a Buy Under $5?

With e-commerce companies competing for retail customer market share in the face of an increasing online shopping trend, Qurate Retail's (QRTEA) negative revenue growth in its last reported quarter raised investors' concerns about the company’s prospects. So, is it worth betting on the stock at its current price level? Let's discuss.

Qurate Retail, Inc. (QRTEA) in Englewood, Colo., is a video and online commerce company that does business in North America, Europe, and Asia. It advertises and sells a wide range of consumer goods, primarily through live television shopping programs, internet, and mobile applications.

The company's shares have declined 64.1% in price over the past year and 41.7% year-to-date to close its last trading session at $4.43. In addition, the stock is currently trading below its 52-week high of $14.62, which it hit on May 10, 2021.

With the economy reopening and consumer spending increasing, both brick-and-mortar and online sales are likely to increase from pent-up demand. However, the favorable industry trend was not visible in QRTEA's financial performance. The company's revenue declined 9% year-over-year to $1.4 billion in the fourth quarter.

Click here to checkout our Retail Industry Report for 2022

Here is what could shape QRTEA's performance in the near term:

Mixed Profitability

QRTEA's $1.22 billion trailing-12-months cash from operations is 668.1% higher than the $159.49 million industry average. However, its 2.4% trailing-12-months net income margin is 63.4% lower than the 6.6% industry average. Also, its trailing-12-months ROA, gross profit margin, and ROC are 65.8%, 5.7%, and 5.7% lower than their respective industry averages.

Discounted Valuation

In terms of trailing-12-months Price/Sales, the stock is currently trading at 0.12x, which is 86.6% lower than the 0.93x industry average. Also, its 0.74x trailing-12-months EV/Sales is 35.2% lower than the 1.15x industry average. Furthermore, QRTEA's 0.48x trailing-12-months Price/Book is 80.4% lower than the 2.45x industry average.

POWR Ratings Reflect Uncertainty

QRTEA has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. QRTEA has a D grade for Stability and Quality. The stock’s 1.80 beta is consistent with the Stability grade. In addition, its mixed profitability is in sync with the Quality grade.

Among the 33 stocks in the F-rated Internet – Services industry, QRTEA is ranked #20.

Beyond what I have stated above, one can view QRTEA ratings for Momentum, Growth, Value, and Sentiment here.

Bottom Line

While QRTEA is currently trading at a discounted valuation, its near-term prospects look uncertain. Analysts expect its EPS and revenue to decline 17.3% and 4.3%, respectively, in the current year. In addition, it is currently trading below its 50-day and 200-day moving averages of $5.49 and $8.67, respectively, indicating bearish sentiment. Therefore, we think investors should wait before scooping up its shares.

How Does Qurate Retail Inc. (QRTEA) Stack Up Against its Peers?

While QRTEA has an overall C rating, one might want to consider its industry peers, Perion Network Ltd. (PERI), Shutterstock Inc. (SSTK), and Vitru Limited (VTRU), which have an overall B (Buy) rating.

Click here to checkout our Retail Industry Report for 2022

What To Do Next?

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QRTEA shares were unchanged in premarket trading Monday. Year-to-date, QRTEA has declined -41.71%, versus a -7.76% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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