Farfetch stock fell 40% as results triggered a downgrade

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It was falling after the luxury fashion e-commerce company reported mixed results and cut its forecast for the value of orders processed.

Following its second-quarter report, released Thursday, KeyBanc Capital Markets analysts downgraded Farfetch (trading ticker: FTCH) shares to “sector weight” from “overweight” “based on low confidence in execution and schedule for profitability.”

Farfetch stock fell 40% to $2.87 on Friday.

farfetch to publish Second-quarter revenue was $572.1 million, down from a year ago and falling below Wall Street’s demand for $648.7 million. It also posted an adjusted loss of 21 cents per share, flat from the year-ago quarter but narrower than the loss analysts had expected of 28 cents.

“Our results for the second quarter demonstrate that Farfetch is growing, becoming more efficient, and delivering on our key strategic priorities,” CEO José Neves said in the earnings release. “We have also taken decisive action to adapt to the macro environment over the past 18 months.”

The company lowered its full-year guidance for the group’s total merchandise value, or the total dollar value of orders processed, to $4.4 billion. from $4.9 billion.

“Although we view the cost optimization initiatives positively, we believe the lower guidance indicates a fairly harsh hurdle in the two hours given the softer trends,” the KeyBanc analysts wrote.

Wedbush analysts called the second-quarter results “extremely disappointing. They maintained their Neutral rating but lowered their price target to $3.50 from $5 and lowered their revised Ebitda forecast for this year and beyond in a report.”

“FTCH remains a very difficult business to get around, with very volatile fundamentals and one of the most confusing models in our space (both business model and financial model),” the analysts at Wedbush wrote.

They added, “While there is an interesting long-term growth opportunity here, the trajectory of business is very difficult to gauge, and we wouldn’t look at this pullback as a buying opportunity.”

Write to Emily Dattilo at emily.dattilo@dowjones.com