The retail investment team at UBS were “surprised” by the extent of the slowdown revealed yesterday in’s sales growth.

Clearly the market was too, because shares in the online retailer plummeted by a third to close at $3.11 — their lowest level since August last year.

UBS has cut its price target for Kogan shares to $5.50 from $8.65 — a revision of 36 per cent which reflects “material downgrades” to the company’s earnings per share forecasts.

The shares are now trading at around $3 — their lowest point in 15 months.

The catalyst for yesterday’s sell-off was a drop in revenue growth, which slowed to 12% across August and September, down from 33% in July.

In particular, revenue from Kogan’s global brands fell by 27%, which the company attributed in part to the GST changes which went into effect on July 1.

GST is now applied on all international goods, not just purchases over $1,000. But Kogan reckons not everyone is playing by the new rules.

“Widespread avoidance of GST has become apparent,” the company said, adding that it’s currently unable determine how long the issue will remain a problem.'s share price (ASX:KGN) dropped by a third this week’s share price (ASX:KGN) dropped by a third this week

UBS said “while the change in the GST laws were expected, the extent of the slowdown wasn’t.

“We see risk this slowdown continues if GST laws are not enforced heavily.”

Kogan will also have to regain the lost market share from its global brands.

The analysts highlighted additional market risks from potential falls in consumer spending, but said there’s currently “little evidence of this”.

While it was a disappointing trading update overall, UBS pointed to two positives.

Kogan’s customer base is still “growing strongly”, up 42% annually to 1.45 million. And there’s even stronger growth in mobile subscribers, which doubled over the past year to around 370,000.

Aside from their base-case share price forecast, UBS has an upside target of $7.50 if Kogan can lift its total subscriber numbers to around 1 million by the 2021 financial year.

Here’s a summary of the key value drivers for Kogan over the medium-term:

Source: UBS
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