Orlando, FL 1/23/12 (StreetBeat) -- Sears (Nasdaq: SHLD) shares keep skyrocketing, jumping another 8.9% today and pushing itself further from rest of the pack as the S&P 500′s top performer this year.The stock’s rally has been fast and furious (and Goldman Sachs is loving it). But whether the company’s underlying fundamentals justify the move is a whole other story.
Credit Suisse analyst Gary Balter is skeptical, to say the least. “We do not see Sears or Kmart turning around their operations to the point that they generate positive cash flow or enough to justify the current stock price,” Mr. Balter says in a note to clients.
As we detailed on Friday, there are such few shares eligible to be shorted. In a short sale, traders borrow shares and sell them, hoping they can buy the shares back in the future at a lower price and return them, pocketing the difference as profit.
Analysts are now beginning to question whether this is the mother of all short squeezes.
“We are stuck in a classic short squeeze, a squeeze that given the float we do not even harbor to speculate when it may end,” Mr. Balter adds. “How the stock moves in the short term is a good question as with so little float, and no stock available to short, this squeeze could go on for awhile. However, when it ends, we would not wish to be on the other side, as we don’t see the value for the equity above our $20 target price.”
Mr. Balter sticking to his $20 price target means the stock would need to fall another 62% from current levels to prove him right. Sounds nuts, but the share price has been on a pretty volatile ride of late.
Shares are trading right around late September levels. At that time, the stock then jumped another 60% in just about a month of trading and was above $80 in late October. But from there through early January the stock plummeted another 65% and hit a four-year low just below $29.
The stock has now rallied 84% in just under three weeks. So, Mr. Balter’s $20 price target may look extremely bearish. But when it comes to this stock, don’t count anything out just yet.
Sears shares were recently up 8.9% at $53.35. For the year, its the S&P 500′s top performer, up 68%.
StreetBeat Disclaimer
No comments:
Post a Comment