Welcome to Episode #208 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Maddy Johnson, Zacks Associate Stock Strategist, for a look at the “cheap” retail stocks.
There are a handful of retailers who are now trading under $5.
Stocks under $5 are beloved by many investors, who see them as a “lottery” stock. After all, all that $1.50 stock has to do is go to $3.00 and you have doubled your money.
For many investors, it’s also fun to be able to buy a lot of shares in a company for little money, as you can when it is trading under $5.
But are stocks under $5 really “cheap” or a “deal”?
Some Retailers Continue to Struggle
Before you rush out to buy retail stocks trading under $5, every investor should do their homework into what is going on in the underlying business first.
There’s usually a reason a stock is trading under $5.
For some, management changes and out-of-favor product lines, have hurt for the last several years.
Others are in the middle of their turnaround plan.
Still others may be a victim of technological changes.
5 Retail Stocks Under $5: To Buy or Not?
1. Pier 1 Imports, Inc. PIR recently pre-announced its holiday sales numbers and said they were closing 450 more stores. The stock was already trading under $1 in 2019 and did a reverse split. Even still, the shares have fallen again to just $3.80. It has a market cap of $16 million and no Zacks Rank as there is no analyst coverage on Zacks.com. To buy or not?
2. Express, Inc. EXPR has staged a big rally off its 2019 lows, gaining 69% in the last 3 months. It’s trading just under $5 now. In the third quarter, comparable sales were down “just” 5% and it guided Q4 comps as a decline between 1%-3%. It has $168 million in cash and no debt. It’s holding an investor event on Jan 22, 2020. To buy or not?
3. J.C. Penney Company is an iconic American retailer, but the big department store has been on the wane in this century. After a change in management, can the new team rejuvenate the brand or is it too late? Holiday comps declined 5.3%, if you strip out the furniture and appliances, both of which the company has now gotten rid of. Shares are back under $1. To buy or not?
4. GameStop GME is back trading under $5 after it announced horrible holiday quarterly sales. Comparable sales were down 23.2% as hardware sales, which includes the consoles, fell 45.8%. Gamers are waiting for the new PlayStation 5 and Xbox consoles to launch at the end of 2020 so this hardware decline was expected. The only segment that saw positive comps was collectibles, up 4.3%. It has plenty of cash and has repurchased a third of the company’s shares. To buy or not?
5. J.Jill, Inc. JILL is another niche retailer that is going through a management change as it searches for a new CEO. Shares have fallen 73% over the last year and are trading just over $1 at $1.26. In some good news, it recently raised its fourth quarter comparable sales outlook to a decrease of only 6-8% versus its prior guidance of a decrease of 8-10%. However, it did lower its earnings guidance to a range of $0.10-$0.12 versus $0.14-$0.16. To buy or not?
There are several other retailers that are trading in the $5-$10 range that might be of interest to investors as well.
Find out what those companies are, and whether you should roll the dice on the retail stocks under $5, on this week’s podcast.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>