Valued at over $3 billion, the maker of medical scrubs, face masks, and shields is going public this week, but should you buy Figs stock?
After a blockbuster year that saw Figs net revenue jump to $263 million in 2020 from $110 million the year prior, the apparel startup is making its market debut. The direct-to-consumer company managed to make that much revenue even when it donated tens of thousands of scrubs to healthcare workers in the U.S.
Figs is an apparel and lifestyle company that makes essential protective gear for healthcare workers. Unsurprisingly, the company saw a huge surge in demand for its products during the pandemic and is now making its market debut eight years after the co-founders started the company.
Last Thursday, trading app Robinhood confirmed that its users can buy pre-IPO shares in Figs if they make a request, which is not something typically offered to retail investors. Usually, shares bought before a company goes public are subject to lock-up agreements, which prevent investors from selling those shares for 180 days.
What is Figs IPO price?
Figs initially planned to offer investors 22.5 million shares priced between $16 to $19 per share in the hopes to raise up to $427.5 million. At that price target, Figs would be worth just over $3 billion.
However, on Wednesday night, the company raised the price to $22 per share, indicating that Figs and the underwriting banks believe there is a big demand for the stock.
When will Figs IPO?
Figs is expected to begin trading on Thursday, May 27, on the New York Stock Exchange under the ticker symbol “FIGS.”
In 2020, Figs posted net revenue of $263.1 million, up from the $110.5 million in 2019. Last year, Figs reported operating income of $57.9 million, an impressive beat after the company had a net operating loss of $300,000 in 2019.
Figs also grew its active customer base from 600,000 in 2019, to 1.3 million in 2020. The Santa Monica-based firm is classified as an emerging growth company which means it is not required to make certain disclosures that larger companies have to until it meets a number of milestones like hitting annual revenue of $1.07 billion. This means investors don’t have as many figures to consider before buying shares on IPO day.
Another perk of investing in Figs is that it counts on highly predictable, recurring revenue from its customers as healthcare apparel constantly needs to be changed. The firm is also not subject to its products becoming out of fashion either, which other apparel companies find costly. The company’s prospectus said:
“Unlike most other categories in the apparel sector, the healthcare apparel industry is largely non-discretionary, recession-resistant and much less susceptible to fashion or fad risk.”
Figs Growth Potential
Figs has huge growth potential. As our aging population grows, so too will the need for more healthcare workers in the U.S., resulting in the need for more protective clothing and accessories.
The Bureau of Labor Statistics stated that the U.S. healthcare sector included more than 20 million workers in 2020. In addition, data from Frost & Sullivan says the total addressable market for healthcare apparel is $12 billion in the U.S. and $79 billion globally. That means the company still has a large customer base to capture.
Figs is also jumping on the digitalization bandwagon and says that 98% of its sales are through its digital platforms, stating:
“Further, we are able to engage with our community of healthcare professionals before, during and after purchase, through our digital platform and numerous other channels.”
The face mask seller is also widening its international footprint and launched pilots in Australia, Canada, and the U.K. in 2020 to offer a “more localized experience to customers internationally.” Investors, therefore, have the opportunity to buy shares now before its global expansion really takes off and the stock becomes expensive.
Most interestingly for prospective shareholders is Figs’s plan to explore its options in selling its products to other professionals who require a uniform. With around 40 million people working in areas outside of healthcare, like food service, hospitality, construction, and transportation, who also need technical gear to do their job, their market potential is huge.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.