FIGS (FIGS) Company Overview

Figs said on Thursday it has rebuffed private equity firm Story3 Capital Partners' offer to acquire the scrubs maker.

Figs stock has lost momentum and remained in a consolidation phase in almost two years. It remained inside the support and resistance levels at $4.42 and $6.97 in this period, missing the strong stock surge in the United States.

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Applied Fundamental Research, a long-term shareholder of FIGS, Inc. (NYSE: FIGS), has submitted an open letter to the company's management and its Board of Directors. The letter highlights FIGS' exceptional achievements in transforming the healthcare apparel market, expresses confidence in the company's ability to execute its growth strategy as a public company, and outlines recommendations for defining a clear capital allocation strategy to unlock shareholder.

An opportunistic offer by a PE fund during a 'retail lull' grossly undervalues FIGS, thus providing a chance for value and arbitrage investors to profit from the situation. Founded by Heather Hasson and Trina Spear, the stock has dropped from over $35 to $6.07 since its 2021 IPO and subsequent takeover offer. Story3 Capital's $6 per share offer to take the company private undervalues the business, which has strong free cash flow and no debt.

Shares of Figs (FIGS -3.85%) jumped this week after the company reportedly received a buyout offer for around $1 billion. In this video, Travis Hoium shows why private equity buyers may be interested and what the stock could do now.

The Story3 proposal values the company at more than $1 billion.

Figs reported disappointing 3Q24 results with a 2% revenue decline and a 13 percentage point drop in adjusted EBITDA margins, leading to a 30% stock price drop. The company's high SG&A expenses and lack of growth make it difficult to compete against lower-priced alternatives, justifying my Hold rating. Questionable $25 million investment in a pre-product healthcare education app raises concerns about capital allocation and potential conflicts of interest.

FIGS, Inc. (NYSE:FIGS ) Q3 2024 Earnings Conference Call November 7, 2024 5:00 PM ET Company Participants Tom Shaw - Senior Vice President, Investor Relations Trina Spear - Co-Founder & Chief Executive Officer Sarah Oughtred - Chief Financial Officer Conference Call Participants Dana Telsey - Telsey Group Josh Reiss - Raymond James Bob Drbul - Guggenheim Brooke Roach - Goldman Sachs Brian Nagel - Oppenheimer Lorraine Hutchinson - Bank of America Matt Koranda - ROTH Capital Nathan Feather - Morgan Stanley John Kernan - TD Cowen Ashley Owens - KeyBanc Capital Markets Operator Thank you for standing by, and good afternoon. Thank you for attending today's FIGS' Third Quarter Fiscal 2024 Earnings Conference Call.

I rate FIGS, Inc. stock as a buy, expecting growth to inflect upwards with orders per buyer potentially more than doubling. FIGS has enhanced top-of-funnel awareness, product innovation, and distribution capacity, driving customer acquisition beyond its core scrub customer base. Margin pressures are temporary; scaling non-scrub products and the high-margin TEAMS business should flip this headwind into a tailwind.