Summary: OVERPRICED
Score: 7/20
MOS: -283%
Share Price: $8
Sticker Price: $2
Is Michaels a good buy?
Michaels is a large retail company that sells arts, crafts, framing, floral & wall decor, and merchandise for do-it-yourself home decorators. They were founded in 1973 and based out of Irving, TX. They currently have 1,250 stores and 44,000 employees.
Let’s take a look at the recent history of this stock…
Even before COVID-19 hit in March of this year, the stock went from $8 in January down to $3 in March, a decline of 62%. The stock continued to fall to $1.56 and then the tide changed. Over the last few months, the stock has gone back up to $10. That’s an increase of 541%. Very impressive but this likely will not last.
Here’s why…
Some retail companies have seen their stock prices sky rocket not because of sales, but because of emotions. In fact, most stocks have been on a wild run since March of this year because of emotions but a correction is about to happen. When quarterly and annual financial reports are released, the truth will be revealed. Warren Buffett has a famous quote “It’s only when the tide goes out you know who’s been swimming naked.” In other words, we’ll see who was able to sustain revenue through COVID-19 and who was not. Those who were not are about to ride the roller coaster back down.
Here is a closer look at the recent financials…
Q4 (2019) revenue was $1.7B.
Q1 (2020) revenue was $799M.
Q2 (2020) revenue… to be determined…
Q2 could be very close if not lower than the Q1 revenues.
With a score of 7/20, this stock is just too risky. With a share price of $8 and a sticker price of $2, this stock could drop significantly. If you own this stock, now is a great time to sell it.
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