"Since this is a long-term investor product and Retail Sector head Brian McGough doesn’t want to be long it past the summer time (see below), I want to take advantage of this week’s ramp and take it off our long-term list," says Hedgeye CEO Keith McCullough. "Happy to revisit once our macro call plays out."
Here's the bullish case for Restoration Hardware from McGough:
Fundamentally, the name looks outstanding on a TRADE and a TAIL basis. The question lies in TREND.
My point is this…
- The results printed earlier this week were 4Q – they report REALLY late. The next quarter ends in just four weeks.
- If you bought a leather sofa today, you would not take delivery until early May. Therefore that would be 2Q revenue. In other words, RH already knows its 1Q number (which will be reported late May/early June). But people don’t look at it that way.
- RH just issued 1Q guidance that I think leaves room for upside – potentially a lot. Guided to $0.04-$0.06.
Then we get into mid-summer ... when you don’t want to own retail stocks anyway, and there’s 3-6 months before the biz accelerates again. During that time they’ll be spending on infrastructure. Don’t want to own it then.
We like it over the next month ... don’t like it again until Sept/Oct ... and we are WELL above the Street next year.