Riding Wall Street's love affair with innovative tech businesses, (NYSE: FTCH) saw its stock soar 158% from the start of 2020 to its all-time high in February 2021. But it's been a wildly different story since then as the shares have cratered 93% and now trade for under $6. It's safe to say that Farfetch has completely fallen out of favor.
Some investors might now be tempted to take a chance on this small-cap e-commerce stock in the hopes of achieving outsized returns from here. But I think this is the wrong strategy. Despite some positive factors, it's best to avoid Farfetch shares altogether. Let's take a closer look to see why.
There are valid reasons investors might want to own the stock. This digital marketplace business connects 1,400 different fashion brands with customers from over 190 countries -- an impressive feat. Farfetch earns its revenue based on the activity occurring on its platform, and the more merchandise there is, the more that buyers will be attracted. Therefore, there are some network effects at play here.
Source Fool.com