Would I buy The Hut Group shares?
Since a strong IPO, The Hut Group (LSE: THG) share price has fallen around 25%, currently sitting at 611p. Nonetheless, in my view, this has given the company a more reasonable valuation. Trading Update  The Hut Groups recent trading update was fairly strong, in particular demonstrating good revenue growth. Indeed, in comparison to 2019, its 2020 revenues were over 40% higher at 1.6bn. This was driven by an increase in customers. In fact, the company now have nearly 7m active customers, which is an increase of 2.8m from the year before. Im also confident that this number can continue growing, especially as new products are released. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air And if you click here well show you something that could be key to unlocking 5Gs full potential... In addition, the industries that THG operates in, mainly beauty and nutrition, are growing. For example, the prestige beauty market is expected to reach 150bn by 2024. This should help the company in its aim of further growing revenues and attracting more customers. On the other hand, the company did make an operating loss of 480m. Although much of this was attributable to share-based payment charges, it still means that its hard to give the shares a fair valuation. Therefore, theres a risk that the company will be unable to reach profitability in the near future, and this could strain The Hut Group share price. Acquisitions  One aspect of the company I do really like is its acquisitions strategy. For example, in February this year, it acquired Dermstore to increase the scale of its beauty ops and improve the online business. I feel that this acquisition was very shrewd and will be fundamental to growing revenues in the future. More recently, THG also acquired Bentley Laboratories, a prestige beauty developer and manufacturer, for $255m. Once again, Im enthusiastic about this acquisition because it will enable more product development. Furthermore, its estimated that this acquisition will increase 2022 revenues by $77m. From a long-term perspective, I believe that The Hut Group share price may benefit on the back of this. Of course, there are risks with making too many acquisitions as an alternative to focusing on organic growth. For instance, the companies being acquired are often bought at a premium. As such, The Hut Group shares could be negatively impacted if they dont produce the desired results. Although I dont believe that this is the case here, especially because I feel THG has a good balance between making acquisitions and focusing on organic growth, its a risk that still needs to be considered. Due to strong consumer loyalty, and strong growth prospects, I feel that the shares have significant upside potential. In my view, the recent dip looks like a correction, rather than being overly problematic. For this reason, Im very tempted to buy, as I think that they could be a very good addition to my diversified portfolio.