Chalk up a victory for the RH RH 0.8% bulls. One of the most heavily shorted stocks in the market, RH, reported better-than-expected second-quarter results Wednesday afternoon, sending shares soaring more than 30 percent in Thursday’s premarket session. The blowout quarter even got Wall Street’s attention.
The Buckingham Research Group analyst Kelly Halsor upgraded RH from Neutral to Buy on the strength of the impressive quarter and said Buckingham is no longer skeptical of RH’s turnaround story. According to Halsor, investors should expect a meaningful margin inflection in the second half of 2017.
“As core earnings power comes into focus, RH is poised to grow revenue at a mid-single digit rate (200 bps sq. footage/3% comp) with the opportunity to claw back ~500 bps of operating margin lost over the last 2 years,” Halsor wrote in the upgrade note.
Loop Capital analyst Anthony Chukumba admitted that earnings, revenue and guidance exceeded expectations, but warned investors about getting too optimistic just yet.
“We remind investors management lowered its F2017 guidance just a quarter ago, as well as the fact the recent EPS outperformance is partially driven by the fact RH bought back nearly half of its outstanding shares in F1H 2017—which we consider ‘financial engineering,’” he wrote on Thursday.
RH short sellers are in for a tough day on Thursday. As of last week, FIS Astec Analytics said RH was one of the five most popular stocks among short sellers.
In addition to the Buy rating, Buckingham has an $88 price target for RH. Loop maintains…
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