PLCE Your Bet
Technicals:
Stock jumped 12% following its last quarterly report, but gave up all those gains during the session and continued the descent over the next few weeks. Stock dipped below the 200 DMA, bounced off support at $95, and is now back above the 200 DMA. The overall up trend is still intact.
Fundamentals:
Stock fell about 9% last week on a press release that it was opening stores in southeast Asia. However, the company has a franchise model for its international stores and actually achieves higher gross margins in its international business, which accounts for about 12% of total sales. Hence, the international expansion should be seen as a positive and not a negative.
PLCE has zero debt and it is closing unprofitable stores, growing online sales and investing in inventory technology to improve margins. The company's buyback and dividends yield a 'cash' return of about 9.5%. With sales growth of 3.5%, that's a 13% return! Short interest is at 31% which suggests a potential for a short squeeze if its next quarterly report is positive once again. This is one of only a few retail apparel names that is actually doing well. Same store sales were up 4.9% in the most recent quarter.
Gymboree, a close competitor, just filed for bankruptcy protection amid declining sales comp. This speaks to Children's Place's out-performance.
Bottomline: Buy. I see the stock tracking back up to its previous highs. PT is $123.
Stock jumped 12% following its last quarterly report, but gave up all those gains during the session and continued the descent over the next few weeks. Stock dipped below the 200 DMA, bounced off support at $95, and is now back above the 200 DMA. The overall up trend is still intact.
Fundamentals:
Stock fell about 9% last week on a press release that it was opening stores in southeast Asia. However, the company has a franchise model for its international stores and actually achieves higher gross margins in its international business, which accounts for about 12% of total sales. Hence, the international expansion should be seen as a positive and not a negative.
PLCE has zero debt and it is closing unprofitable stores, growing online sales and investing in inventory technology to improve margins. The company's buyback and dividends yield a 'cash' return of about 9.5%. With sales growth of 3.5%, that's a 13% return! Short interest is at 31% which suggests a potential for a short squeeze if its next quarterly report is positive once again. This is one of only a few retail apparel names that is actually doing well. Same store sales were up 4.9% in the most recent quarter.
Gymboree, a close competitor, just filed for bankruptcy protection amid declining sales comp. This speaks to Children's Place's out-performance.
Bottomline: Buy. I see the stock tracking back up to its previous highs. PT is $123.
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