Hi, in brief this is a novelty cafe along the lines of a Hard Rock cafe or Planet Hollywood--their theme is the rainforest. They operate 4 or 5 (sorry not exactly sure due to the fact that some expected openings have not materialized) restaurants and have big plans for expansion(9 more next year). 14.5 million shares outstanding at current price of 35 means you are paying over 500 million dollars for this company(The P/E is currently 136) a restaurant with a theme of which there are many--Hard Rock, Planet Hollywood, All Star Cafe , Fashion Cafe, Motown Cafe, Harley Davidson, Jecklyll and Hyde etc. etc. etc. I contend that the valuation is ludicrous and that the major tourist cities of the world (which are the only locations that can support these novelty restaurants with overpriced food) are already supersaturated at this point. Any turnaround in this stock promises to be brutal and yeild a tremendous return to short sellers.
On a technical note the stock made a new high last week- followed by a hanging man top(for those of you who know candlesticks this is a bearish sign of high reliablility when it occurs at the end of a long upmove) together with high volume indicating the distribution phase where new longs buy at the high. I think the market is ready any day now for a major crack to the downside. I welcome all comments and opinions, on this bubble waiting to burst. |
