In Allbirds, Wall Street begins to build the bull and bear case for an ESG-branded stock

A woman walks past an Allbirds store in the Georgetown neighborhood of Washington, D.C., on Tuesday, Feb. 16, 2021.Al Drago | Bloomberg | Getty Images

Allbirds has focused on its use of natural, environmentally friendly materials to set itself apart in the sneaker space from long-standing brands like Adidas, Nike and New Balance.

Putting ESG efforts at the core of its business has also caught the eye of Wall Street ahead of Allbirds reporting financial results for its first time as a public company after the market close on Tuesday.

Allbirds, which initially priced its 20.2 million shares at $15 to raise roughly $303 million in an offering early in November, saw a massive surge on its first day of trading, closing up nearly 91% at $28.64. However, the stock has slid since, declining more than 34% as of yesterday's close.

But the growing appeal of sustainable companies to both investors and consumers has left many analysts bullish. More money has flowed into funds and stocks that have an ESG focus — $3 out of every $10 going into global equities is being directed into ESG, according to Bank of America. The environment was ranked as the most important political and social issue by teens in Fall 2021, according to the Piper Sandler “Taking Stock With Teens” survey, signaling potential Allbirds buyers in the future.

ESG as a differentiator

“Allbirds' focus on sustainability will be a key differentiator both from a consumer and investor perspective,” Bank of America analysts wrote. “The uniqueness of sourcing sustainable materials (i.e. wool, tree, sugar cane) helps Allbirds stand out relative to peers and will likely continue to increase as consumers incorporate higher sustainability standards into products they buy. The other advantage is centered on the amount of investing dollars that continues to shift into ESG funds.”

BofA put a buy rating and a $23 price target on the stock.

Allbirds shares were trading under-$19 on Tuesday.

Piper Sandler noted that the company's “strict commitment to sustainability is a key differentiator vs peers and will create tens of millions of loyal consumers over time.”

“To that end, BIRD plays into several structural investment themes including: consumers shifting towards a direct relationship with brands, an acceleration of casual & athletic product and increasingly relevant ESG conversation for consumers & investors alike,” Piper Sandler analysts wrote, placing a buy rating and a $26 price target on the stock.

Stifel analysts wrote that a proprietary survey of more than 11,000 consumers across six countries showed “broad market agreement” around the trend towards the “appreciation of sustainability” as well as the “casualization of fashion,” areas it says are in “the brand's ethos.”

“Allbirds has uniquely aligned its brand and operations with megatrends that are likely to drive consumer spending for the foreseeable future,” Stifel analysts wrote. “The leadership position in bringing sustainable materials to market at scale has earned credibility with conscious consumers and the suppliers and potential partners across the value chain.”

Stifel placed a buy rating on the stock with a 12-month target price of $25.

The challenges of staying sustainable

Some analysts noted the challenge of keeping that sustainability crown in a highly competitive sneaker and apparel market, especially as the company starts to compete more in the performance space.

“There is a threat from larger incumbent players such as Nike & Adidas investing heavily in similar natural & sustainable materials commercialization capabilities, noting BIRD does not maintain patents on the materials or design, which could impact Allbirds' competitive positioning,” Baird analysts wrote.

In 2020, Allbirds and Adidas partnered to create performance running shoes that have no carbon footprint. Approximately 10,000 pairs have been released so far, with a larger release planned for the spring/summer season in 2022.

Allbirds launched its first running shoe, the Tree Dasher, in 2020, and released a running apparel collection this summer.

“Allbirds is making a concerted effort to expand into performance athletic and apparel,” Telsey Advisory Group analysts wrote. “The athletic footwear industry is competitive with well-established players Nike and Adidas having a significant share of the market at 39% and 19%, respectively, in 2020. In addition, there are a number of fast-growing brands, including On and Hoka, catering to a similar consumer as Allbirds.”

There also comes the challenge of maintaining that commitment to ESG practices.

Cowen analysts wrote that as sustainable practices are not yet at scale in the footwear industry, it “often carries a higher 'cost of doing business' to source materials that meet the company's sustainability requirements in the near term until availability and adoption become more mainstream.” They also warned that there could be “reputational risk if BIRD is not able to meet ESG standards.”

Stifel also pointed out the reputation risk when it comes to ESG practices.

“The foundation of the Allbirds brand is its reputation for positive environmental stewardship. With this the brand needs to be beyond reproach,” Stifel analysts wrote. “Any environmental missteps or overstatement of environmental claims would receive considerable attention in the press and on social media likely impacting brand reputation and demand for Allbirds products.”

Initially, Allbirds said it had planned to go public in what it called the “first sustainable public equity offering,” or SPO. In its first S-1 filing to the SEC in August, it outlined a framework created in consultation with outside groups that would establish a variety of environmental, sustainability and governance standards that it would have to meet.  

But Allbirds removed or weakened the language around the framework in subsequent editions of its prospectus, including deleting a line that other companies could also follow the SPO framework. Allbirds CFO Mike Bufano told the Financial Times that the company had received feedback from the SEC that prompted the changes.

Securities and Exchange Commission Chairman Gary Gensler has stated multiple times that the agency is evaluating several things related to ESG, including launching a climate and ESG enforcement task force.

“Further, I've asked staff to consider potential requirements for companies that have made forward-looking climate commitments, or that have significant operations in jurisdictions with national requirements to achieve specific, climate-related targets,” Gensler said in June.

But the focus on ESG is only expected to grow for consumers and investors, presenting a significant opportunity for companies like Allbirds to further their commitments.

“You see regulators planning actions, analysts asking ESG questions on quarterly calls, shareholders raising the topic at annual general meetings – these are all things that were once niche but have taken hold,” Aron Cramer, the president and CEO of Business for Social Responsibility, told CNBC. “Paying close attention to ESG as an essential element of business strategy has grown very substantially.”

News Related

OTHER NEWS

Delhi HC lists for April 20 PIL on issue of Prime Minister's security

Prime Minister Narendra Modi was stuck on a flyover for almost 20 minutes on his way to Punjab to attend an event on January 5 after protesters blocked his way. ... Read more »

Cybertech Consolidated December 2021 Net Sales at Rs 35.57 crore, up 17.56% Y-o-Y

Reported Consolidated quarterly numbers for Cybertech Systems and Software are: Net Sales at Rs 35.57 crore in December 2021 up 17.56% from Rs. 30.25 crore in December 2020. Quarterly Net ... Read more »

Havells India Standalone December 2021 Net Sales at Rs 3,652.25 crore, up 15.36% Y-o-Y

Reported Standalone quarterly numbers for Havells India are: Net Sales at Rs 3,652.25 crore in December 2021 up 15.36% from Rs. 3,165.85 crore in December 2020. Quarterly Net Profit at ... Read more »

SHAREINDIA Consolidated December 2021 Net Sales at Rs 201.00 crore, up 81.16% Y-o-Y

Reported Consolidated quarterly numbers for SHAREINDIA are: Net Sales at Rs 201.00 crore in December 2021 up 81.16% from Rs. 110.95 crore in December 2020. Quarterly Net Profit at Rs. ... Read more »

Elixir Cap Consolidated December 2021 Net Sales at Rs 1.00 crore, down 86.05% Y-o-Y

Reported Consolidated quarterly numbers for Elixir Capital are: Net Sales at Rs 1.00 crore in December 2021 down 86.05% from Rs. 7.19 crore in December 2020. Quarterly Net Profit at ... Read more »

California Soft Consolidated December 2021 Net Sales at Rs 4.00 crore, up 900% Y-o-Y

Reported Consolidated quarterly numbers for California Software are: Net Sales at Rs 4.00 crore in December 2021 up 900% from Rs. 0.40 crore in December 2020. Quarterly Net Profit at ... Read more »

Lyka Labs Consolidated December 2021 Net Sales at Rs 35.57 crore, up 32.67% Y-o-Y

Reported Consolidated quarterly numbers for Lyka Labs are: Net Sales at Rs 35.57 crore in December 2021 up 32.67% from Rs. 26.81 crore in December 2020. Quarterly Net Profit at ... Read more »

Delhi Metro will curtail services on Republic Day

Delhi-Metro Delhi Metro services on Line 2 between HUDA City Centre and Samaypur Badli will be curtailed on January 26 on account of the security arrangements for the Republic Day ... Read more »

Gland Consolidated December 2021 Net Sales at Rs 1,063.33 crore, up 23.73% Y-o-Y

Reported Consolidated quarterly numbers for Gland Pharma are: Net Sales at Rs 1,063.33 crore in December 2021 up 23.73% from Rs. 859.42 crore in December 2020. Quarterly Net Profit at ... Read more »

Sphere Global Consolidated December 2021 Net Sales at Rs 1.26 crore, down 35.25% Y-o-Y

Reported Consolidated quarterly numbers for Adroit Infotech Limited are: Net Sales at Rs 1.26 crore in December 2021 down 35.25% from Rs. 1.94 crore in December 2020. Quarterly Net Profit ... Read more »

Anand Mahindra, ex film student, may just take up Madhya Pradesh Chief Minister's offer

Anand Mahindra had revealed in a tweet on January 20 that he wanted to be a filmmaker and studied the subject in college.  After industrialist Anand Mahindra revealed last week ... Read more »

Real estate market sentiment up in December quarter but Omicron concerns linger

Sentiment Index Score for real estate touched a record 65 for the fourth quarter of 2021, topping the previous high of 63 in the third quarter, noted a report called Knight Frank-FICCI-NAREDCO Real ... Read more »

New airbag rule: What it means for automobile customers

Airbags: Saving lives Union Minister of Road Transport and Highways Nitin Gadkari recently has taken forward his proposal of making six airbags mandatory for all eight-seater vehicles. Gadkari had recently ... Read more »

Domestic car sales drop 4.2% in 2021, seen higher this year

FILE PHOTO: Models pose beside a Nissan Kicks E-Power electric vehicle car at the Thailand International Motor Expo 2021 in Bangkok on Dec 2, 2021. (AFP) Domestic car sales fell ... Read more »

PM Modi interacts with Pradhan Mantri Rashtriya Bal Puraskar recipients

PM Narendra Modi (File image) Prime Minister Narendra Modi on Monday virtually interacted with the winners of the Pradhan Mantri Rashtriya Bal Puraskar and awarded them certificates digitally using block ... Read more »

Market nosedives for fifth straight session, investors lose over Rs 17.5 trillion: 5 reasons why

The Indian market’s downward spiral continued for the fifth consecutive session on January 24, with the benchmark indices trading almost 2 percent down each at mid-day. The five days of ... Read more »

Moneycontrol PRO & Espresso present Nifty Banker 2.0 on Monday, 24th January, at 8 pm, with Prashant Mullick on “A Nifty Mean Reversion Story”

Prashant Mullick | PC-MoneyControl Nifty Banker 2.0 is India’s First Retail Index Traders Online Conferences to be organised in India. Some of the best index traders in India will share ... Read more »

HUL Q3: Discretionary, out-of-home products grow at pre-COVID levels

Even as Hindustan Unilever Limited (HUL) battles inflationary headwinds and a slowdown in rural India, the company’s discretionary and out-of-home portfolio, which consists of products ranging from ice cream to ... Read more »

RBI to conduct overnight VRR auction of Rs 75,000 crore on January 24

Representative image The Reserve Bank of India on Monday said it will be conducting an overnight variable rate repo auction under liquidity adjustment facility (LAF) for an amount of Rs ... Read more »

Here are the reasons why Netflix hasn't been able to crack the Indian streaming market

Representative image. India has been a tough market for US streaming giant Netflix to crack, a fact Chief Executive Officer Reed Hastings made amply clear in his fourth-quarter earnings call ... Read more »

Pepsi rolls out its first-ever donut in collaboration with Randy's

Photo by: Pepsi Press Release Pepsi Cola announced the release of its first-ever donut in partnership with Randy's. This new treat from the soft drink manufacturer will be available for ... Read more »

Tata Technologies plans to hire 3,000 innovators in next 12 months

Source: ShutterStock Global engineering and product development digital services firm Tata Technologies on Monday said it will hire over 3,000 innovators over the next 12 months under its expanded talent ... Read more »

Sri Lanka hopeful of obtaining further Indian aid of $1.5 billion: Foreign Minister

Representative Image The Sri Lankan government has said that there is a possibility of it obtaining a further USD 1.5 billion in aid from India, weeks after New Delhi announced ... Read more »

Explainer: Why is PTC India Financial Services under the scanner for corporate governance?

PTC India Financial Services (PFS) has been taking heat for lapses in corporate governance and compliance after three of its independent directors quit last week. The Securities and Exchange Board ... Read more »

An entrepreneur shares tips on investing in NFTs for beginners

An NFT is a special type of cryptographic token which represents something unique (Image Source: Shutterstock) Non-fungible tokens – NFTs – are becoming ubiquitous even as many people may still ... Read more »

Philips expects sales to recover from supply chain woes after the summer

Dutch health technology company Philips said on Monday it expects sales to recover strongly in the second half of the year, while a steep decline due to global shortages of ... Read more »

GM reportedly investing $6.5B and creating 4,000 new jobs at Michigan plants

Photo by: Elishia Jayye/Unsplash General Motors is reportedly set to make an announcement, and it is about a major investment and incentive package that the state board is expected to ... Read more »

BJP trying to take credit for works started by BSP govt: Mayawati

Mayawati BSP president Mayawati on Monday said the BJP government in Uttar Pradesh is trying to take credit for works started by her when she was chief minister. She also ... Read more »

RBI to conduct variable rate repo auction under LAF today

The Reserve Bank of India will conduct a variable rate repo auction on January 24 for a notified amount of Rs75,000 crore, the central bank said in a release. The ... Read more »

UAE intercepts Houthi attack, Saudi Arabia reports two injured by fallen missile

AP The United Arab Emirates intercepted and destroyed two Houthi ballistic missiles targeting the Gulf country on Monday with no casualties, its defence ministry said, following a deadly attack a ... Read more »

US dollar edges up on Fed and Ukraine jitters, cryptocurrencies slip

Representative image The dollar firmed slightly on Monday with traders nervous about tensions in Ukraine and a possible hawkish tilt by the Federal Reserve at a much-watched meeting this week, ... Read more »

Mumbai high-rise blaze: One more person dies; toll rises to 7

The fire erupted around 7 am in Kamla building located opposite Gandhi Hospital at Gowalia Tank. (Image: ANI) One more person on Monday succumbed to injuries suffered in a fire ... Read more »

Chinese developer Yuzhou warns of bond defaults amid mounting liquidity crisis

Chinese developer Yuzhou Group Holdings warned of certain bond default events, citing the liquidity crisis affecting the company and the wider real estate industry. The Hong Kong-listed company said in ... Read more »

Indian rupee falls 9 paise to 74.52 against US dollar in early trade

Representative image The rupee declined 9 paise to 74.52 against the US dollar in opening trade on Monday, as muted domestic equities and elevated crude oil prices weighed on investor ... Read more »

US firms cite Covid-19, worker shortages as main risks: survey

American companies ended the year on a strong note but are worried about resurging Covid-19 infections, although supply issues are expected to ease, according to a survey released Monday. Just ... Read more »

Coronavirus Update | India reports 3,06,064 new COVID-19 cases, 439 deaths

Source: AP India logged 3,06,064 new coronavirus infections taking the total tally of COVID-19 cases to 3,95,43,328, while the active cases climbed to 22,49,335, the highest in 241 days, according ... Read more »

Gold muted ahead of Fed meeting for rate hikes cues

Gold prices were little changed on Monday, as investors awaited the U.S. Federal Reserve’s meeting for clues on its interest rate hikes, while concerns over inflation and Russia-Ukraine discord kept ... Read more »

HDFC Life indicates gradual rise in term insurance premiums: Here's what you must do

Term life insurance premiums have been soaring upwards since March 2020. The life insurance industry has increased term premiums three to four times in two years. The most recent round of ... Read more »

Toyota says its Tianjin joint venture resumed production on January 22

Toyota said operations at its joint venture complex in the eastern Chinese city of Tianjin resumed operations on Saturday after measures to curb the spread of COVID-19 prompted it to ... Read more »

What should investors do with Reliance Industries post Q3 earnings: buy, sell or hold?

The share price of Reliance Industries (RIL), which reported a healthy set of numbers for the December quarter, slipped into the red after opening higher in the morning session on January ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic