Companies Like Allbirds (NASDAQ:BIRD) Could Be Quite Risky

Just because a business does not make any money, does not mean that the stock will go down. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether Allbirds (NASDAQ:BIRD) shareholders should be worried about its cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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When Might Allbirds Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In March 2025, Allbirds had US$39m in cash, and was debt-free. In the last year, its cash burn was US$69m. So it had a cash runway of approximately 7 months from March 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. However, if we extrapolate the company's recent cash burn trend, then it would have a longer cash run way. Depicted below, you can see how its cash holdings have changed over time.

See our latest analysis for Allbirds

How Well Is Allbirds Growing?

Allbirds actually ramped up its cash burn by a whopping 56% in the last year, which shows it is boosting investment in the business. As if that's not bad enough, the operating revenue also dropped by 24%, making us very wary indeed. Taken together, we think these growth metrics are a little worrying. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Hard Would It Be For Allbirds To Raise More Cash For Growth?

Allbirds revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Allbirds' cash burn of US$69m is about 78% of its US$89m market capitalisation. That's very high expenditure relative to the company's size, suggesting it is an extremely high risk stock.

Is Allbirds' Cash Burn A Worry?

There are no prizes for guessing that we think Allbirds' cash burn is a bit of a worry. Take, for example, its cash burn relative to its market cap, which suggests the company may have difficulty funding itself, in the future. And although we accept its falling revenue wasn't as worrying as its cash burn relative to its market cap, it was still a real negative; as indeed were all the factors we considered in this article. Once we consider the metrics mentioned in this article together, we're left with very little confidence in the company's ability to manage its cash burn, and we think it will probably need more money. On another note, we conducted an in-depth investigation of the company, and identified 4 warning signs for Allbirds (1 can't be ignored!) that you should be aware of before investing here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.