I discovered last night when researching COVID earnings plays that a ticker that has arguably flown somewhat under the radar has earnings coming up on the 8th after market.
RH, Restoration Hardware, is a luxury home furnishings company specializing in anything that costs thousands of dollars and up. During COVID, stock dropped to $80 and since has ran to a peak of $744, now trading at $536. This makes it, to my knowledge the largest COVID related pump we’ve found yet.
The company has been surviving on preorders due to supply chain concerns, which likely have no eased. To be clear, their current revenues do not sustain their current valuation at all. While growth is on the horizon, it is not likely coming soon enough to save them from a COVID correction similar to PTON & DOCU.
Another interesting bit is that this beast is 96% institutionally owned and it’s owned in large chunks (>8% on average), meaning that if even one investor decides to sell, it can have a substantional effect on the stock.
Heres some other information I’ve pulled on this potential play:
NOTE: This post is a Wiki so anyone can edit the OP and add to the information it contains. Also note that this play is the sole idea of @Navi unless it goes well and then I claim it.
Yes, I was going to bring this up. They are now building stores with swanky restaurants. I’ve yet to be able to a decent reservation at the one in Charlotte when I’m there for work.
Their search is climbing down about a 3.5% down for globally but just from the us its about 9 percent down.
They have also been slowly losing searches over the months from the growth chart.
Williams-Sonoma recently had earnings back on 11/18, they own Pottery Barn & West Elm, and the companies have a similar market cap. Their earnings sunk the stock 10% after-hours, but rose pre-market and opened only like 5% down, but continued to climb back to it’s previous price by late morning.
If you compare price earnings and eps for each company, the p/e is 18 for WSM and eps is much higher, where RH p/e is sitting at 31.17. That being said, it seems like the ones that are crashing are the ones closer to 60+ p/e.
My only concern here is that, according to the data above, the company has $13 billion in cash. That could be used to repurchase shares, issue a dividend, or something I am not thinking of that could increase the value of the company. It will be interesting to see what is announced and what the market sentiment is going into earnings.
Why does this feel like LZB (La-Z-Boy) to me? Tons of backlogged orders. They announced ER AH and the stock shot up like 10% before falling back to earth PM and was even good for some ITM puts by the the end of trading the next day.
Guidance was poor, IIRC with the standard supply-chain issues stemming from China.
The only problem is there has been zero insider selling in the past 2 years nearly. The data is nearly useless for that one. The have only granted about 4452 shares in the past two years for their directors which is only 2.5 mill in grants.
I like this as an earnings put play, but I also think that it’s going to run up to earnings and possible come back to November 30/December 1st levels based solely on technicals. What appears to be forming in the 45 minute is a small EWT Wave 1. One of the bastards of EWT is you really can’t declare it a wave 1 until you have some data past it, but one thing that pretty dependably precedes it is low volume. Immediately before this little bump we saw a volume of 200 over the course of 45 minutes.
Tomorrow will tell if we’re actually looking at a wave, we would expect to see a 3 point simple correction or a 5 point complex correction, all keeping it within a 50-61.8% retracement from the high of Wave 1. If it does this it is my opinion that RH could run back to 600 before earnings. I would say that if you already have puts on RH, keep an eye on the 542 to 548 range. If it bounces off of this range your puts are at risk of the typically more explosive wave 3, which would signal strong growth.
Take profits if it’s appropriate, I do carry the opinion that there will be another time to enter a puts position if you wish to play this one.
