Shorting More HBI on the Quarter. Roadmap to a Meaningful 2H and 2019 Guide Down.
We’re going back to the wood with our HBI short. The stock has rallied 35% since the analyst day in mid-May, and absolutely nothing has changed fundamentally. We get the whole 'Champion is hot' call -- but our analysis suggests that it's turning into more of a liability for the stock than anything else. The second quarter looks good. Nothing changed there – this simply was never the quarter for the story to break. We think that in 2H (which started already) is when HBI faces another downward leg to both earnings and cash flow. We’re 20% below the Street this year on Cash Flow, and 35% for 2019. If our numbers are right, we’re likely looking at HBI breaking back through the previous recent low of $16.80, and being revalued on lower numbers in the low-teens. A 5x EBITDA multiple on our 2020 estimates leaves the company with no equity value left. There’s terminal value here, but it simply accrues to bondholders.
Date: Tuesday, July 24th, 2018 @ 2:00pm ET
Confirmation Number: 13681747
Video Link will be Provided Prior to the Call