WOOF | Adding To Long Bias. We're Buyers On Recent Weakness. We're adding Petco Health and Wellness (WOOF) to our Long Bias List, as our model suggests TAIL value of $30, which is 50% higher from current levels. To be clear, we'd be buying more Best Idea Long CHWY here over WOOF -- particularly given recent weakness -- as it's far more dominant in the pet ecosystem over the long term. But WOOF hit our $30 price target on January 13th, the day it priced its IPO at $18 (above the $14-$17 range), and has since lost a third of its value, and on Friday it flirted with its IPO price. This thing's got hair for sure (debt, bloated store base), but we liked the deal sub-$20 in January, and with the recent price correction, we like it there now -- especially given its favorable Quad 2 characteristics such as small cap, levered, and heavily shorted (22% of the float).
Michaels (MIK): Removing from Long Bias list. While we knocked this idea to the bottom of our idea list when it hit ~$17, we’ll close out the position with the stock trading in line with Apollo’s $22 offer to take it private. Ironically, last week it was announced that Joann Stores is coming public again. Likely coming out at 9x EBITDA – which is where MIK is being taken out.
