Veteran Retail analyst Brian McGough has been making the short case for Helen of Troy (HELE) for the entirety of 2023.
The stock just dropped off a cliff (-8.8% in a 24-hour span), but McGough’s position remains the same: the stock still has a long way to fall.
“I think you really get paid on this name. You’ll get paid here today but I think you get paid in a BIG way in 2024,” McGough explained today on The Call @ Hedgeye.
"This is a company that has organic sales down, the CEO is going to manufacture whatever special charges he can just to get earnings to not be down … I think they will be down.”
McGough pointed to some of the same problems today as he did when he introduced the short to Hedgeye Nation nearly nine months ago.
“It looks like this company has a cash flow problem, and certainly a working capital problem,” he said.
On January 17, 2023, Hedgeye’s Retail team hosted a webcast with veteran short-seller Marc Cohodes, where he broke down his thesis on HELE and outlined why it’s primed for short sellers to generate alpha.
“The stock chart looks like hell,” McGough said on the Real Conversation webcast. “You could’ve said, ‘Why was this a short?’ at $200 when management was buying back stock. You could’ve said, ‘Oh, I missed it,’ at $150. I think you still haven’t missed it. Our conclusion is, ultimately, you’re looking at earnings power of about $4-$5, where the Street is underwriting about $10-$11 in non-gap non-cash earnings, which probably gets you to a $30-$40 stock, potentially even lower.”
The January webcast is available to watch HERE.
For more stocks McGough and the Retail team believe will generate alpha in 2024, subscribe to Retail Pro.
