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Is the tumbling Dr Martens share price a bargain?

Dr Martens (LON: DOCS) share price has been in a freefall in the past few days as concerns about the company’s growth remains. The shares crashed to a low of 196p, which was its lowest level since May 22. It has plunged by more than 33% from the highest point this month.

Bootmaker faces headwinds

Dr Martens is a popular bootmaker and retailer with over 60 years in the industry. The firm manufactures some of the most popular high-fashion boots. It makes about 51% of its revenue from its Originals segment followed by Fusion and Casual. A small portion of its revenue comes from kids and accessories. 

Dr Martens stock price has been in a freefall since last week when the company published mixed results. Its revenue jumped by 18% to £418.6 million in the six months to September. Its EBITDA remained unchanged at £88.8 million while the firm’s profit after tax slipped from £48.6 million to £44.7 million.

The company’s strong growth happened because of its direct-to-consumer business, which rose by 21%. It also increased the prices of most products as inflation continued rising. By region, the company’s EMEA business grew by 9% while America had 31% growth, helped by the strong US dollar. APAC revenue rose by 9%.

Dr Martens faces significant challenges in its key markets. As inflation rises, the volume of premium shoes the firm is selling has dropped. As we wrote in this article, UK inflation surged to 11.1% in October. As a result, the firm has seen its profits retreat. It also expects that its business will remain being under pressure for a while.

The stock also plunged after the firm warned of profits in the next few quarters. Still, there are positive signs for the company. It has diversified its sourcing, with the products manufactured in China falling to 5% from 60% eight years ago. Further, the company will benefit as inflation and supply chain challenges eases.

Dr Martens share price forecast

Dr Martens stock by TradingView

The four-hour chart shows that the DOCS stock price has been in a strong downward trend in the past few weeks. It has managed to move below the key support levels at 205p and 203p, the lowest points at October 13 and November 24. It has moved below all moving averages.

Notably, oscillators like the Relative Strength Index (RSI) and Stochastic Oscillator have moved below the oversold level. Therefore, I suspect that the oversold shares will rebound in the coming weeks as investors buy the dip.

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