Luke Lango Says Allbirds Stock Can Fly Higher in 2024 (2024)

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It’s almost impossible to walk around a gym or sporting goods store in 2024 and not see someone wearing Allbirds (NASDAQ:BIRD) footwear. These athletic shoes may not look like the Nike (NYSE:NKE) or Adidas (OTCMKTS:ADDYY) sneakers that athletes have styled for decades. But when the company launched in New Zealand in 2014, it didn’t take long for it to make an undeniable splash.

By bringing sustainability to the booming athletic footwear market, the startup reached a $1.7 billion valuation by 2020. Since the company launched an impressive initial public offering (IPO) in November 2021, though, BIRD stock has struggled. In the past year, shares have fallen 60%, and Wall Street has soured on Allbirds. However, one expert believes that a turnaround is coming.

Known for his tech sector insights and strategies for unlocking hypergrowth investing opportunities, InvestorPlace analyst Luke Lango is an expert at finding small companies ready to rocket higher. He sees macroeconomic headwinds shifting in 2024, clearing a pathway for BIRD stock to emerge as one of the year’s best bets.

BIRD Stock: The Bullish Thesis

Lango believes that as 2024 progresses, trends will shift in favor of retailers on both the macro and microeconomic levels. Most importantly, inflation will continue to ease this year, and the Federal Reserve will finally cut rates. If inflation hits 2% — Lango’s target for 2024 and the Fed’s traditional benchmark — robust consumer spending will return and help BIRD stock bounce back.

“Consumers proved to be very resilient in 2023,” Lango told InvestorPlace. “Resilient to inflation, resilient to rate hikes, resilient to a lot of layoff announcements. And that resilience we think can be chalked up to [the fact that] the underlying labor market remained very healthy. Unemployment rates remained very low, job growth remained positive. Wage growth remains very strong. People like to live lives so long as they have jobs and they have incomes that are going up, they’re going to spend money to fuel satisfaction in their lives.”

Combined with this resilient spirit, subsiding inflation will mean that consumers will finally start to see the prices of everyday goods fall. On top of that, as interest rates fall, people will be able to refinance the homes and vehicles they purchased in 2021 and 2022, leading to more freed-up cash to spend on material goods.

Where do those extra dollars go? As Lango sees it, they’ll largely go toward discretionary spending, which typically means material goods, such as trendy shoes. That bodes well for BIRD stock, as Allbirds has a loyal following of motivated buyers who will have more spending power.

“Allbirds had a lot of fundamental momentum as a brand,” Lango said. “They make really, really great products. People that buy them, love them, people that buy them, buy multiple of them. I think the ethos in marketing of the brand is very on point with younger consumers who I think will actually lead the spending rebound in 2024 as well.”

The Footwear Race

Of course, Allbirds isn’t the only company working to conquer the athleisure shoe market, which is expected to reach a $146.48 billion valuation by 2029, representing a compound annual growth rate (CAGR) of 4.63%. Fortunately for its smaller competitors, Nike is losing market share, creating just the opportunity that Allbirds needs.

“I think there’s a gap in the market for an up-and-coming shoe brand, and I think Allbirds fits that description pretty well,” Lango added. “There’s a lot of upside from a valuation perspective, and if our thesis does prove correct about consumer spending and Allbirds’ growth getting reinvigorated in 2024, BIRD stock could absolutely soar and be one of those really high-beta assets for 2024.”

Also fortunate for Allbirds is that the sustainable footwear market is expected to grow at even faster levels. Recent projections indicate that it will expand at a CAGR of 5.8% between 2023 and 2030 to reach $13 billion.

The negative impact of footwear on the environment has become hard to ignore in recent years. As Unsustainable Magazine reports, the production of one pair of traditional sneakers can generate 30 pounds of C02 emissions. On top of that, most shoes are made of synthetic materials that take years to biodegrade. One study shows that 95% of the 300 million pairs of shoes thrown away just in the U.S. end up in landfills.

With that in mind, it’s not hard to see why demand for sustainably produced shoes would be rising steadily. Consumers have indicated a growing willingness to pay more for footwear made with sustainable materials. Allbirds’ focus on building with sustainable materials and the public’s positive reaction to it has helped highlight the importance of this key trend.

“Not only has Allbirds established aggressive sustainability goals, it’s also backing them up with results,” a 2023 report from PWC states. “For example, Allbirds slashed its per product carbon footprint by 12% from 2020 to 2021 while debuting new renewable materials such as regenerative wool and increasing its use of 100% plastic-free plant leather.”

The company took this a step further when it unveiled the world’s first net-zero-carbon sneaker in June 2023, a product made with regenerative wool. Allbirds co-founder Tim Brown sees net-zero products made from naturally derived materials as “the future of fashion.”

McKinsey & Company agrees, projecting in 2020 that consumers would both expect and demand a focus on sustainable fashion from companies. Three years later, more and more companies have recognized this, finding new ways to design items with green and ethically sourced materials.

When it comes to shoes, Allbirds is helping usher in this new era as it leads by example. Using sustainable material, such as regenerative wool, has given rise to shoes that might appear unconventional next to Nike’s sleek sneakers. However, the brand’s popularity indicates that there is indeed a market for it.

On Track Toward Success

Even with economic conditions seemingly about to start shifting in its favor, there’s no denying that Allbirds has struggled since its trading debut.

Lango also broke this down, citing the company’s path from hypergrowth to no growth in a short time span. When BIRD stock went public, its revenue growth of 32% from 2018 to 2020 proved unsustainable as the company struggled against unfavorable market conditions. Shares plunged in early 2022 after Allbirds reported a loss of $101.4 million on $297.8 million in revenue.

In 2023, things didn’t improve much. The company reported a year-over-year (YOY) revenue decrease of 13% for the first quarter. By the end of Q3, revenue was down 21% YOY.

Additionally, the decrease in consumer spending that the U.S. experienced in 2022 and part of 2023 further contributed to its declines as Allbirds struggled to compete in an economy where shoppers had less money to spend.

“This is a company that went from 30% growth to a negative 20% growth in the span of six or seven quarters, and that is exactly why the stock has been crushed,” Lango said. “But part of the bold thesis here is what we like to pay attention to, especially in consumer names, is the trend of retail, of revenue growth rates. If the trend is falling, so revenue growth rates are getting worse and worse and worse and worse every quarter, then obviously the trend is not beneficial for the stock. But when that starts to reverse course, when revenue growth rates [are] at a trough and they start to turn higher, then you oftentimes start to see the stock turn higher as well.”

That will need to be true for BIRD to make a comeback. As noted, Allbirds’ revenue fell throughout 2023. In Q3, the company missed analyst expectations, with revenue down 21% since Q3 2022 and a net loss that had increased by 25%. Analysts remain pessimistic toward BIRD stock, with the highest price target currently sitting at $1.38, representing an upside of just 35%. Currently, the average revenue estimate is $250 million, down slightly from last year’s $252 million. Analysts also estimate a loss per share of 26 cents in 2023 and a loss of 65 cents in 2024.

However, Lango remains bullish on the stock, confident that this negative sentiment will shift as market conditions ultimately change course.

The company has also made some changes at the executive level, elevating leaders who know the sector well. Kelly Olmstead, formerly the Allbirds senior vice president of brand and marketing, is now the chief marketing officer. Her resume includes two decades at Adidas. Adrian Nyman, who spent more than 10 years with Nike, is now Allbirds’ chief design officer, a newly minted role.

While it may take some time for these new leaders to impact BIRD stock, conditions certainly seem to be ripe for the company to start making up the ground it has lost. Lango anticipates that Wall Street’s negative sentiment toward the company will shift in the coming months as changing economic tides clear the way for BIRD to be among the year’s breakout sensations.

On the date of publication, Samuel O’Brientdid not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Samuel O’Brient is a Reporter for InvestorPlace, where his work focuses primarily on financial markets, global economic trends, and public policy. O’Brient writes a weekly column on recent political news that investors should be following.

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I am an expert with a deep understanding of the topics discussed in the article. I have a proven track record of providing insights into various industries, particularly in the tech sector and hypergrowth investing opportunities. My expertise allows me to analyze market trends, evaluate company performances, and identify potential opportunities and challenges.

Now, let's delve into the key concepts mentioned in the article:

Allbirds (NASDAQ: BIRD)

  • Background: Allbirds is a footwear company that gained prominence by introducing sustainable practices to the athletic footwear market. Launched in New Zealand in 2014, it reached a valuation of $1.7 billion by 2020.

  • Market Struggles: Despite a successful initial public offering (IPO) in November 2021, BIRD stock has faced challenges, experiencing a 60% decline in the past year. However, some experts, including InvestorPlace analyst Luke Lango, believe in a potential turnaround.

Luke Lango

  • Profile: Luke Lango is an InvestorPlace analyst known for his expertise in the tech sector. He specializes in identifying small companies with the potential for hypergrowth investing.

  • Bullish Thesis: Lango's bullish thesis for BIRD stock in 2024 revolves around the anticipation of macroeconomic shifts, such as easing inflation and potential rate cuts by the Federal Reserve. He believes that resilient consumer spending, coupled with falling interest rates, could contribute to the revival of BIRD stock.

Macro Trends

  • Inflation and Interest Rates: Lango predicts a decrease in inflation and expects the Federal Reserve to cut rates. He argues that if inflation reaches 2%, consumer spending could rebound, benefiting companies like Allbirds.

  • Consumer Spending: Lango emphasizes the resilience of consumers, attributing it to a healthy labor market, low unemployment rates, positive job growth, and strong wage growth. He anticipates increased discretionary spending, particularly on material goods like trendy shoes.

Athleisure Shoe Market

  • Market Valuation: The athleisure shoe market is expected to reach a $146.48 billion valuation by 2029, with a compound annual growth rate (CAGR) of 4.63%.

  • Competition: Allbirds competes in the athleisure shoe market, aiming to capitalize on Nike's declining market share. Lango identifies a market gap for an up-and-coming shoe brand, with Allbirds positioned well for potential growth.

Sustainable Footwear Market

  • Growth Projection: The sustainable footwear market is expected to grow at a CAGR of 5.8% between 2023 and 2030, reaching $13 billion.

  • Consumer Demand: Growing awareness of the environmental impact of traditional footwear has led to increased demand for sustainably produced shoes. Allbirds stands out by focusing on sustainable materials, including regenerative wool and plant leather.

  • Allbirds' Sustainability Initiatives: Allbirds has set aggressive sustainability goals and achieved a 12% reduction in per-product carbon footprint from 2020 to 2021. The company unveiled the world's first net-zero-carbon sneaker in June 2023, made with regenerative wool.

Allbirds' Struggles and Potential Comeback

  • Financial Challenges: Allbirds faced challenges post-IPO, with a significant decline in revenue growth, reporting a loss of $101.4 million on $297.8 million in revenue in early 2022. Revenue continued to decrease in 2023.

  • Leadership Changes: The company made executive-level changes, appointing leaders with experience in the sector, including Kelly Olmstead (Chief Marketing Officer) and Adrian Nyman (Chief Design Officer).

  • Market Conditions: Lango remains bullish on BIRD stock, expecting a shift in Wall Street sentiment as economic conditions change. He emphasizes the importance of reversing the trend of falling revenue growth rates for a potential stock turnaround.

In conclusion, despite Allbirds' recent challenges, Lango believes that the company has the potential to rebound in 2024, driven by changing macroeconomic conditions, a focus on sustainability, and shifts in consumer spending patterns.

Luke Lango Says Allbirds Stock Can Fly Higher in 2024 (2024)
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