בס״ד

STOP! There’s 1226% on the Table; GO! The Grocer With Empty Shelves! (GO, COP)

Posted on July 6, 2022

There’s a profit avalanche a’rumbling…

And that’s why we’re coming at you early.

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Today’s business appears further below, but we’re leading with an open trade that’s fried and friendly and ready to eat.

So cue the energy sector –

It’s our COP trade, whose details can be found HERE.

In brief, we’re holding a debit of $5.26, a short COP July 15th 115 CALL and a long COP July 15th 92.50 PUT.

And…

The CALL can be left to wither.  With COP now trading at $84.64, we see little chance of a move higher of that magnitude (to 115) in the next nine days.

On the other hand, the PUT trades for $8.45.  Sell it and you exit with a stout $3.19 NET (on an initial outlay of just $0.26).

And that’s 1226%.

And now we push the cart to the checkout.

Grocery Outlet (NASDAQ:GO) touts itself as an “extreme value retailer of quality, name-brand consumables…”

And there’s no question its stock has destroyed its industry peers in the grocery aisle this year due to a unique sourcing and distribution strategy that kept her (mostly) clear of supply chain issues.

That said, all good things eventually go belly-up dead.

And we feel the time for GO to begin that process is about now.

For Several Reasons…

But mostly because an investment in GO shares now represents an extreme DEARTH of value.

Take a look at her fundamentals –

  • GO trades with a trailing P/E of 77.94 (ridiculous, since we’re dealing with little more than a glorified IGA).
  • Forward P/E is half that figure, coming in at just 37.94.  Or, if you prefer, analyst consensus is for the company to either DOUBLE its earnings or HALVE its stock price in the next twelve months.  We’re veering towards the latter.
  • The stock offers no Dividend, and
  • Trades with a belly-busting Price to Book ratio of 4.05.
  • EPS declined this year by 42.20%, and
  • The latest quarter numbers also disappointed – Q/Q Earnings were down 38.70%.  Yes, the company posted “beats” on both sales and earnings in its latest quarter report, but that was on the back of vastly diminished expectations.
  • Finally, insiders have divested themselves of 50.96% of their holdings in the last half year, for a total of $27 million.  Of that total, $21 million were dumped in just the last 60 days.

Now the chart –

The Lord, G-d of Israel will prove Himself, here and everywhere else His beloved worshippers stand to glorify His great and mighty name.

.אין עוד מלבדו

With kind regards,

Hugh L. O’Haynew

 

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