HBI | It’s Still Shortable. Numbers are Wrong.

01/01/19 06:00PM EST

The new consensus view on HBI is that it is no longer shortable given another 40% rout in 2018 where it set new 5-year lows. Yes, a 4Q miss is likely baked into a $12.50 stock – the consensus is already at the bottom of management’s guidance for the quarter, and like many other names in the market (especially retail), it simply looks cheap at 9x consensus earnings. As much as I’d like to declare victory on this one (shorted it at $29), the reality is that the REAL earnings base in FY19 is 22% below the Street, and as those numbers are realized this stock is headed lower. People are modeling the base business appropriately, but are not factoring in the decremental margins associated with the C9 loss, share loss at WMT, and retail bankruptcies.  More importantly, investors are not modeling what is likely to be erosion in the International business – something that otherwise obfuscated share loss in the US over the past two years. Using Base case assumptions in our model, we get to 25% downside from here, though ultimately our Bear case model is still the most likely over a TAIL duration, which gets us to a sub-$5 stock. I’d argue that a 6x EBITDA multiple is fair on the Bear model – which suggests about a buck per share in Equity Value. 2019 is the year where HBI’s debt load will start to matter. Don’t go chasing this name because it looks cheap on fake numbers.

Call Details
Date/Time: Thursday, January 3rd 2PM EST
Toll Free:
Toll:
UK: 0
Confirmation Number: 13686202
Live Video Link: Will be provided prior to event

HBI | It’s Still Shortable. Numbers are Wrong.  - 1 1 2019 HBI model scenarios

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