Fadem did note that At Home’s results were very impressive and that he missed the proverbial boat. But he is urging investors not to blindly chase the stock after such a big gain. He noted that the recent tailwinds likely will fade and that seasonal inventory may be tight at the same time that the school-related spending and holiday seasons now appear to look less than normal. Wells Fargo’s new earnings estimates are up at $1.52 per share for fiscal year 2021 and $1.00 per share for fiscal year 2022.
BofA Securities gave At Home a double-notch upgrade to Buy from Underperform, and the firm’s Curtis Nagle took a prior $5 price objective all the way up to $16.50 after the solid preliminary results. Nagle sees At Home being a big beneficiary of the “invest in home trend,” and he was positive that At Home had paid down a large piece of debt in an effort to lower its risk (leverage) while also adding credibility to future store growth.
The BofA report did warn that At Home has suffered from prior execution issues, and the call still points to a highly competitive landscape in its lower price points. The report also points out that its own aggregated credit card and debit card spending was still showing a 28% gain in spending on home furnishing stores through late July. One additional gain is from At Home deserving a higher EBITDA multiple due to a higher confidence on sales and earnings growth through the next two to three years.
Always keep in mind that no single analyst call, no matter how positive (or negative) it sounds, should ever be used as a sole basis to buy or sell a stock.
Also remember that investors who chase yesterday’s winners just because of price moves and higher volume might be seriously overpaying, as short-term and long-term investors may use the gains to take profits or to get out of what had been a long-term loss at better prices. Using that lesson for At Home’s particular stance is that investors may want to look for pullbacks in the stock for better entry points, or if the desire to own the stock outweighs trying to get a better price, it likely means that this may have to be owned for long-term investors rather than just blindly expecting the prior day’s gain to be repeated in short order.
Shares of At Home closed up 33% at $12.60 on Thursday, and the 23.1 million shares traded was also on the heels of gains from the prior day and in mid-July, when this was a $6.50 stock. The stock was trading down 1.6% at $12.40 on Friday morning, and the trading volume was not very much more than 1.1 million shares after the first hour of trading.