XpresSpa Group Inc (NASDAQ: XSPA) has had a compelling run in the market as of late, and that run is continuing this morning with more than 10% gains in the premarket. If you’re looking for press releases or SEC filings, you may be upset to find nothing. Nonetheless, there’s a good reason for the gains.
As COVID-19 variants increase, investors are beginning to realize that even with vaccines, the demand for testing will likely continue for the long term, boding well for the company that shifted its business model from in-airport spas to in-airport COVID-19 testing facilities at the beginning of the pandemic. Here’s what’s going on:
Skip to What You Want to Read
- What is XpresSpa & XpresCheck?
- Why the Stock Is Headed Up
- What Analysts Think About XSPA Stock
- Risks to Consider Before Buying XSPA Stock
- Final Thoughts
What is XpresSpa & XpresCheck?
XpresSpa started as an in-airport spa facility. Through the company’s in-airport locations, consumers could get a massage, facial, and other spa services while awaiting their flights, and the business was doing well. That is, until COVID-19 hit.
When the COVID-19 pandemic set in, non-essential companies were shut down. This included Spas. However, unlike many in the industry, XSPA didn’t roll over and wait for the storm to pass.
No, the company launched XpresCheck.
Already having real estate inside airports, the company knew that COVID-19 testing would be in high demand. So, it quickly announced plans to launch a network of in-airport COVID-19 testing facilities.
Like any company with a good idea, XSPA was told by many that this couldn’t be accomplished and they would lose money. However, that’s far from the case. Today, the company has several COVID-19 testing facilities in multiple airports across the United States and is on the verge of turning the idea into a revenue generating machine.
Score one for the underdog!
Why the Stock Is Headed Up
While XpresSpa hasn’t issued any news or SEC filings this morning, it didn’t have to in order to excite investors. Ultimately, there are a couple of big reasons the stock is ticking up:
- COVID-19 Variants. First and foremost, we’ve been hearing more and more about new variations of the virus that leads to COVID-19, and there are questions as to whether or not the vaccines will have any efficacy against these variants. Moreover, even if vaccines are effective, not everyone will get one and COVID-19 is likely going to strike fear in consumers for years to come. As a result, it’s becoming clear that demand for COVID-19 testing will continue, meaning that XSPA has plenty of time to turn big profits from its in-airport testing facilities.
- Short Squeezes. Lately, there have been a string of short squeezes as retail investors work to take on the hedge funds. Most recently, the group that acts as the ringleader in these moves, Wall Street Bets, announced that it would be attacking hedge funds that short companies looking to make a change in the field of medicine. Well, XSPA is a great target. The short percent of volume sits at about 21%, meaning that there are plenty of shorts to squeeze out, and the company has been looked at as an underdog, making it appealing to Wall Street Bets Redditors.
The bottom line here is simple. While XSPA was told that it couldn’t and wouldn’t be successful with in-airport COVID-19 tests, it is proving those naysayers wrong. At the same time, heavy short interest on the stock makes it a great target for retail investors who want to stick one to the hedge funds. As such, there’s compelling potential here, both in the short and long run.
What Analysts Think About XSPA Stock
While there aren’t many analysts covering XpresSpa at the moment, what the company lacks in quantity, it makes up for in quality of analyst coverage.
The one analyst that is covering the stock rates it a Buy with a $3.50 price target. That price target suggests the opportunity for gains of more than 30% when compared to the most recent closing price.
Keep in mind, it’s never a good idea to blindly follow the opinion of analysts or any expert. Nonetheless, expert opinions are a great way to validate your own.
Risks to Consider Before Buying XSPA Stock
If you’re going to invest in XSPA stock, or any other stock for that matter, you’re going to have to be willing to accept the risks that come along with the investment. When it comes to XpresSpa, the most significant risks include:
- Profitability. XpresSpa isn’t a profitable company. As a result, it must rely on the cash it has in the bank. If that’s not enough to get it to profitability, and the funds dry up, the company will likely move forward with a capital raise, resulting in the dilution of existing shareholder value and declines.
- Speculation. While XSPA has done a great job of getting XpresCheck into airports, the in-airport testing business model is relatively young and definitely unproven. As a result, an investment in XpresSpa now is a speculative bet.
- Penny. Finally, XSPA is a penny stock. As such, it’s subject to the volatility commonly seen in this category of stocks. High levels of volatility are dangerous as they make entrance and exit decisions difficult and open the door to the potential for dramatic short-term declines.
Sure, there are risks to consider before diving into XpresSpa stock, but there are risks to consider before making any investment. All told, XSPA seems like an exciting opportunity.
The company did what few experts thought it could do when it announced the launch of the first in-airport COVID-19 testing facility. Since then, it has launched several others. At the same time, the stock makes for a great short squeeze target, opening the door to potentially significant gains both with a long-term and short-term time horizon. All in all, XSPA stock is one for the watchlist.