Express, Inc. (NYSE: EXPR) is screaming for the top in the market this morning. However, if you’re looking for SEC filings or press releases, you’ll be hard-pressed to find anything. Nonetheless, there’s a good reason for the run in value. Here’s what’s going on:
Skip to What You Want to Read
- Increasing Stimulus Helps Express Grow
- Improving Metrics Set the Stage for a Strong COVID-19 Recovery
- A Short Squeeze in Play
- What Analysts Think About EXPR Stock
- Risks to Consider Before Buying EXPR Stock
- Final Thoughts
Increasing Stimulus Helps Express Grow
As mentioned above, Express is climbing in the market this morning, following up on the recent, strong gains that we’ve seen out of the stock. Without press releases or SEC filings, investors are wondering why.
The fact of the matter is that Express is a retail company that experienced serious pain during the COVID-19 pandemic, and while other retailers have recovered in a big way, EXPR stock remains heavily undervalued.
Nonetheless, this creates an opportunity.
At the moment, investors are betting that another stimulus bill will result in checks being sent to consumers across the United States. As stimulus continues to roll out, consumers are expected to spend more money, which is great news for players in the retail space.
Essentially, as stimulus continues to roll out, investors are expecting that sales will rise, pushing the company into profitability. However, that’s not the only factor driving the more than 100% increase in value this morning.
Improving Metrics Set the Stage for a Strong COVID-19 Recovery
One of the reasons EXPR hasn’t done well in terms of a recovery from the COVID-19 pandemic has a lot to do with finances. Ultimately, the company was already running on a shoe-string budget. When COVID-19 rolled in, leading to declines in spending, the company found itself in a pretty tough spot, and since, has been working to improve its balance sheet and liquidity.
Recently, Express has made strides toward an improved balance sheet and liquidity, making it a stronger option among investors. Let’s not forget, the company tied down $140 in additional financing a week and a half ago.
Now that the financial blues at the company are beginning to become a thing of the past, investors are excited to get involved as the potential for a strong COVID-19 recovery in EXPR stock is becoming more clear.
A Short Squeeze in Play
At the moment, EXPR stock is experiencing a short squeeze. After all, with the financial blues the company was in, short sellers jumped all over the stock, betting on declines.
To do so, short sellers borrow shares and immediately sell them. When the price falls, they buy the shares back to return them, making the difference between the buy and sell price as profits.
However, when the value of the stock ticks up, profits quickly turn to losses, and with investors starting to see opportunity in EXPR stock, demand for the stock has risen, leading to strong gains as of late.
At this point, shorts are running for cover. They’re not willing to hold their positions and wait for declines, so they’re quickly buying shares and cutting their losses. This move, known as a short squeeze, is leading to tremendous gains in both price and volume, and a major player in the dramatic, more than 150% growth we’re seeing in the stock this morning.
What Analysts Think About EXPR Stock
According to TipRanks, Express doesn’t necessarily have the backing of analysts. In fact, only one analyst covers the stock, and that analyst rates it a buy with a price target of $1.50.
However, it’s important to keep in mind that this analyst coverage is somewhat outdated. It doesn’t take the $140 million in additional capital brought through the door recently into account, which changes the game for the company. I also think that the impact potential stimulus coming down the line will have on the company suggests that there’s potential for a buy rating here.
Nonetheless, it’s never a good idea to blindly follow what analysts, or any experts, including myself, say. Ultimately, it’s important to do your own due diligence and use expert opinions to validate your own, rather than lead the charge in your investing portfolio.
Risks to Consider Before Buying EXPR Stock
Investing involves risk, you read it on disclaimers at the bottom of just about every stock market website. The fact is that there is no such thing as an investment without risk of loss. When it comes to EXPR stock, investors should consider the following risks before diving in:
- Pennies. EXPR is a penny stock. These stocks come with increased volatility and generally have a business model that’s not quite proven yet, increasing the risk you take when you decide to invest.
- Capital. Express does generate revenue, but not nearly enough to cover expenses. If the company can’t get to profitability before its bank account runs dry, it will likely look to the market as a way to raise funds. Unfortunately, this will lead to dilution of existing shareholder value and declines.
- Speculation. A bet on EXPR stock is a very speculative one. The bet suggests that the company will be able to tap into the increasing consumer spending that’s likely ahead, pushing its way to profits. That’s a tall order my friends.
While there are risks to consider before buying Express stock, there are risks in any investment you make. At the end of the day, if things go well here, they’re likely to go VERY WELL.
The fact of the matter is that the company has spent the last few months improving its balance sheet and liquidity. As a result, it is now on a relatively strong foundation from which it should be able to overcome the blues set in place by the COVID-19 pandemic.
All in all, if you’re not watching EXPR stock yet, you may be missing out on a very big opportunity!