Cricut, Inc. (CRCT): A Bear Case Theory

We came across a bearish thesis on Cricut, Inc. on Valueinvestorsclub.com by deerwood. In this article, we will summarize the bulls’ thesis on CRCT. Cricut, Inc.’s share was trading at $5.84 as of September 3^rd. CRCT’s trailing P/E were 17.18 according to Yahoo Finance.

Cricut, Inc. (CRCT) presents a compelling short opportunity, with shares potentially falling to $3.50, reflecting 52% downside from current levels. The company, known for its DIY cutting machines and associated subscription service, has seen its stock inflated in recent months due to one-time items boosting Q1 results and a $0.85 special dividend, which attracted temporary investor interest. However, fundamentals remain weak.

The core DIY and scrapbooking market is in structural decline, with competition intensifying from both lower-cost machines and third-party materials. Cricut’s subscription revenue, previously a bright spot, faces a looming “cliff” as the active user base peaks at near-saturation, with a portion of users unlikely to convert to paid plans. Access to free templates and designs further limits upside for subscription growth.

Consensus estimates projecting growth in 2026 appear overly optimistic. Management’s plans to reinvest in printer R&D and marketing are expected to compress margins by 200-300bps in 2025, with uncertain benefits. Connected machine sales have stagnated despite repeated efforts, and the accessories and materials business faces strong competition from online discounters, pressuring margins further. Q1 results were boosted by one-time gains from inventory adjustments and bad debt recoveries, artificially inflating earnings by an estimated $8 million, creating a misleading picture of profitability.

Valuation is stretched at 17x NTM consensus EBIT, and even conservative adjustments suggest 2026 EBIT could reach only $50 million versus $60 million consensus, implying a target price near $3.30. Additional near-term catalysts include earnings misses, guidance cuts, and continued insider selling. While Cricut remains the leading brand in its category, structural headwinds, intensified competition, and subscriber base saturation support a significant downside for the stock.

Previously we covered a bullish thesis on Intel Corporation (INTC) by DeepValue Capital in April 2025, which highlighted the company’s transformational opportunity in AI, domestic chip manufacturing, and a looming PC refresh cycle, with potential for multi-year revenue and margin recovery. The company’s stock price has appreciated approximately by 22.63% since our coverage. Deerwood shares a contrarian perspective, emphasizing a bearish short case on Cricut, Inc. (CRCT) due to structural market decline, subscriber saturation, and inflated Q1 earnings.

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Disclosure: None.