Cricut Inc. (NASDAQ: CRCT) is a major player in the home crafting industry, having recently gone public in late October 2020 after merging with Apollo Global Management. On November 18, Cricut’s stock experienced a significant drop of more than 35%, which caused many investors to take notice.
The immediate cause of the drop was a reduction in the company’s full-year outlook for revenue and earnings growth. Cricut had previously projected sales to grow between 40-50% for 2021, but it now expects that growth to be closer to 25%. This news came as a surprise to investors, who had been expecting the company to continue its strong performance from 2020 fueled by the pandemic-driven demand for crafting supplies and services.
The news was further compounded by other factors that may have contributed to the decline in Cricut’s stock price. First, there are concerns over Cricut’s ability to maintain its current market share as competitors like Silhouette America and Brother International enter the market with similar products and services. Additionally, there is uncertainty about how long the pandemic-driven demand for home crafting will last, as well as potential challenges related to supply chain disruptions due to Covid-19.
Finally, it appears that some investors may have been taking profits on their Cricut investments following the company’s initial public offering (IPO). Since going public in late October 2020 at $36 per share, Cricut’s stock had nearly doubled before its November 18 drop back down below $30 per share. This could suggest that some investors were taking profits off of their early investments as they saw Cricut’s stock price reach new highs.
Overall, it appears that a combination of factors may have contributed to Cricut’s recent stock drop on November 18th. The company’s revised outlook for 2021 sales growth was likely the primary driver of the decline in stock price; however, other factors such as competition from rival companies and profit taking from early investors also likely played a role in driving down shares of Cricut Inc.
Conclusion: The sudden drop in Cricut Inc.’s stock price can be attributed primarily to its revised outlook for 2021 sales growth; however, other factors such as competition from rival companies and profit taking from early investors also likely contributed to driving down shares of this popular home crafting company on November 18th.