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Aggressive Growth

bebe stores (BEBE - Snapshot Report) is about to report earnings and could be a short squeeze candidate. The stock has beaten earnings for three straight quarters which has helped make it a Zacks #1 Rank (Strong Buy).

Company Description

bebe stores engages in the design, development, and production of women's apparel and accessories. Its products include a range of separates, tops, dresses, active wear, and accessories in career, evening, casual, and active lifestyle categories. The company markets its products under the bebe, BEBE SPORT, bbsp, and 2b bebe brand names targeting 21 to 34-year-old woman. As of July 2, 2011, it operated 252 retail stores. The company was founded in 1976 and is headquartered in Brisbane, California.

bebe Meets or Beats in Three Straight Quarters

bebe has met or topped earnings estimates in three straight quarters. Over the course of the last three quarters, the company has topped the Zacks Consensus Estimate by an average of $0.01, but the percent beat averages out to be 88%. Those are some heavy pennies! The stock, however, has only moved by an average of 2.7% following the big beats.

In the September 2011 quarter, the stock rose 5.1% following a 200% beat of the bottom line. The company reported earnings of $0.03, $0.02 better than the Zacks Consensus Estimate and were 400% higher than year ago levels. Revenues of $126 million were $4 million ahead of the Zacks Consensus Estimate and showed an increase of 6.7% from the year ago period.

bebe Most Recent Reported Earnings

On February 2, 2012 bebe reported revenue of $152 million, roughly $4 million ahead of the Zacks Consensus Estimate and up from $136 million reported in year ago quarter. In addition, earnings per share came in at $0.08, $0.01 higher than the Zacks Consensus Estimate of $0.07. The beat of 14% was the smallest since the March 2011 quarter when bebe met the Zacks Consensus Estimate.

bebe Expected to Report Earnings

bebe is expected to report earnings on May 3, 2012. The Zacks Consensus Estimate is calling for revenue of $119 million and EPS of $0.01. The year ago period saw revenue of $109 million and a loss of $0.03. Following the release last year, the stock moved higher by 4.7%.

bebe Earnings a Squeeze Play

From the end of January 2012, through the middle of February, short interest in bebe shares decreased from 1.6 million shares to 1.5 million shares. The early February earnings release undoubtedly aided in the squeeze over that time period, but since mid-February, short interest has increased. The most recent data from NASDAQ shows short interest as being more than 1.625 million shares. Should the company beat estimates, then there could likely be another short squeeze.

BEBE - ticker BEBE>
 
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Valuation

The valuation picture for bebe is more towards the higher end, just like the apparel it sells. The trailing PE of 58x is more than double the industry average of 24x and the forward PE of 38x is double the 19x industry average. The price to book is a more reasonable multiple coming in at 1.9x compared to a 3.3x industry average. The price to sales multiple of 1.3x is also much closer to the industry average of 0.9x.

The Chart

Like most of the rest of the market, bebe saw a great run from November 2011 through March 2012. Toward the end of March, the stock retreated from nearly $9.50 to the current level near $8. This weakness could provide a great entry point for aggressive growth investors looking to participate in a potential earnings short squeeze should the company beat earnings and convey a positive outlook for the near term. bebe Zacks #1 Rank (Strong Buy).

bebe - ticker BEBE>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at twitter.com/bbolan1

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