Retailer Gaps to Record Low After Earnings

FRAN stock has shed roughly half its value since early July

Sep 11, 2018 at 10:22 AM
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Francesca's Holdings Corp (NASDAQ:FRAN) is getting demolished this morning, losing 31.1% to trade at $4.06, earlier touching a record low of $3.92. The retailer's second-quarter earnings and revenue both came in lower than expected, and the company cut its full-year outlook. B. Riley responded by cutting its rating to "neutral" from "buy" and its price target to $4 from $9.

FRAN shares had already been trending lower in recent months, shedding roughly half their value since peaking at $8.48 in early July. This is all great news for short sellers, who've continued to pile on the stock. In the last two reporting periods, short interest rose 17.3%, and these bearish bets now account for roughly one-fourth of the total float. Going by average daily volumes, it'd take short sellers more than 13 sessions to buy back their shares.

Meanwhile, we could see more bearish analyst attention come FRAN's way. For example, the average 12-month price target among those covering the equity is $9. This would suggest the shares are overdue for price-target cuts, especially when you consider the lackluster fundamental performance. 

Taking a quick peek at options activity on Francesca's, volume has been light on an absolute basis. However, the top open interest position stands at the September 7 call, where data points to buy-to-open activity. So unless these traders were short sellers hedging against an upside move, they're likely licking their wounds amid today's sell-off.

 

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