Vitamin Shoppe reports earnings this Wednesday before the bell. One thing is almost certain, the stock is going to have a sharp reaction ahead of the report. I remain in $VSI calls to capture the potential continued upside for the stock. These calls are already up 100% after the recent rally, and while I locked some in I am actually looking out to February 2019 for more calls. Why? Because I think the stock is in the early stages of a turn around. And I'm not alone.
I've covered $VSI recently on two previous occasions during this rally.
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Two firms have amassed a combined 35%+ stake in the company since late last year. On top of that other firms, investors have reported new/increased stakes in the company. We'll have to wait for the most recent ownership info, but adding up the stakes a few weeks ago and I ran out of shares!
$VSI I know holdings change, but plugging in last reported holdings, and even leaving out some of the smaller stakes I ran out of shares...hmmm... just confirming my bullish bias - $50 a share in revenue $122m in debt $GNC $33 a share in revenue and $1.3 Billion in debt pic.twitter.com/CWrpgp42YB
— UPBOptionMil (@UPBOptionMil) July 18, 2018
and the shorts are still betting for more downside with over 50% of the float short.
The shorts still think this stock has a lot more downside... like to $0.00. Yet we have big money come in buying up the stock and getting seats on the board and betting on a turnaround.
The price action is clearly turning around: We have two earnings gaps to the downside acting as possible magnets on this reversal. I don't want to think about $20 until we get to $10. And clearly its not a lot at $10 either especially if Wednesdays earnings report is not at least as expected.
However it is clear Vitamin Shoppe is doing everything they can to turn it around. They have a new CFO. They recently named a brand new CEO and just last week hired a new marketing director. New, New, New. And of course we have new investors in this company, one of who just bought out $RCII for a 50% premium.
Back in 2013, with the stock at record highs at almost $66 a share the company had LESS revenue and almost 30% MORE outstanding shares.... imagine that.
A stock that has steadily plunged from $66 in 2013 to $2.95 in 2017, you would have though it was the other way around.
The turnaround is based on a company that is already reporting $50 share in revenue. That is paying down its debt.
I don't know what $VSI is going to report on Wednesday. $GNC had a great earnings report recently, that was greeted with an initial spike higher of 10% followed by a sell-off to near record lows. $GNC is saddled with near serviceable debt and awaits a lifeline form a China company to bail them out later this year.
$VSI, on the other hand, had been taking its lumps the last 1.5 years, impairment charges, goodwill, charges for discontinued operations, all of which have severely affected their earnings. It's akin to pruning a tree. All the dead wood is just about clipped off. It took a while, but now its ready to blossom again.