Trader's Edge: Ashford.com (ASFD)
06-Sep-00 09:28 ET
Santa Claus is coming to town. In the sack, slung over his back, is a stock capable of doubling by the time old St. Nick has begun his rounds.
Trading Points
Many investors doubtful that we will see a holiday season rally in the e-tail group this year; which is precisely why this analyst is looking for a pop. The seasonal surge in share price will be built on a combination of high short-interest, small floats, and the relative affordability of a thousand share lot (most names in the group trading below $5 per share).
Investors have been shorting online luxury goods retailer, Ashford.com (ASFD 3 1/16), as if the company were going out of business. While quiet possible that in the not too distant future the Ashford.com web site will have been boarded up, the company has enough cash to make it through this Christmas. Ashford.com's financial situation also bolstered by $25 mln line of credit secured in July.... Short interest in the stock currently stands at 22 days. Short-sellers are leaning against ASFD to the tune of 2.55 mln shares, which translates to almost 30% of the float having been shorted.
With ASFD sitting at the bottom of its chart (52-week low $2.50) and a catalyst within sight in the form of the holiday selling season, this is a short-squeeze waiting to happen.
Stock's 11% run on Friday, on volume of just 108,000 shares, demonstrates the benefits of having a limited number of shares available for trading. Interest by a few hundred investors is all that is needed to light a fire under this particular stock.
Look for the stock to creep higher over the next three months, with the big breakout occurring over a 2-3 day period. Potential catalysts include: 1) an analysts upgrade (ASFD's bankers include Goldman Sachs, DB Alex. Brown, Robertson Stephens); 2) a timely press release (preferably right around Thanksgiving); 3) a CNBC appearance (this was responsible for stock's 148% one-day run last year).
However, the breakout is most likely to occur as momentum players pick up stock in sympathy with a rally in other e-tailers, such as eToys (ETYS) or even Amazon.com (AMZN). As a result of the company's 8.6 mln share float, it will not take much participation to move the stock.... EToys would have been our top candidate for a Christmas rally, but stock's sizeable float of 42.7 mln shares may make ETYS a difficult stock for traders to put into motion.
Once the momentum buying begins, fear that uptick in price being a harbinger of a major holiday season rally will cause short-sellers to begin reeling in some of the more than 2.5 mln shares that have been borrowed to bet against the stock.
Combination of momentum buying and short covering could carry Ashford.com to the $7-$8 level on an intraday basis.
Investors should remember that this is a highly speculative play. In fact, this holiday season could well be the last time ASFD shares venture above the $4 mark again. If ASFD has not rallied by the second week of December, we would cut the stock loose and move on, as issue is likely to retest its lows.
--------------------------------------------------------------------------------
Back to Top
Copyright © 2000 Briefing.com, Inc. All rights reserved. |
