Not all investors and Wall Street analysts listen to post-earnings conference calls on issues in their portfolio or area of coverage.
Tracey Ryniec of Zacks Research listened to the conference call after the close on Tuesday for Restoration Hardware Holdings (NYSE:RH) and provided our listeners with some invaluable insights.
Her commentary and the corresponding price action in the stock make it the PreMarket Prep Stock of the Day.
Sandbagging Or Not? Some investors are skeptical to listen to conference calls for one simple reason. That reason is that do not believe what the higher-ups at the company are saying about the most recent earnings report and moving forward.
After a good report, execs may be cautious for the next quarter to lower expectations. After a bad report, execs may be super optimistic about the next one.
In the case of RH, the company’s CEO Gary Freeman did not sugarcoat things at all and flat-out warned investors the company has several issues to deal with, such as inflation, consumer confidence and the supply chain.
To emphasize his caution, he used the “scary” several times during the presentation.
Total Disbelief: When Ryniec appeared on Wednesday’s broadcast, she was emphatic about how negative the call was. In fact, in all of her years on Wall Street, she had never witnessed such a pessimistic conference call. She relayed her concerns to investors during a “tweetstorm” while the call was actually taking place.
My thoughts on the RH call and Gary's caution: the business has changed in just the last 4 weeks. They think its temporary but they don't know. Are being conservative but moving forward with everything. Supply chain won't b... https://t.co/5KMgHKnqJS
— Tracey Ryniec (@TraceyRyniec) March 29, 2022
The discussion on RH from Wednesday’s show can be found here:
PreMarket Prep's Technical Take: When the issue was being covered on the show, it was trading at the $364 area. Co-host Dennis Dick reiterated his comments from Tuesday’s show that the “higher-end retail is going to suffer the worst from inflation, and RH is ridiculously high-end.”
He added: “This is not the type of stock that I want to own in this environment.”
The author of this article noted the importance of the issue holding the trio of lows at $350 area even though it was $14 above the level. More importantly, it was discussed that the issue had a big up day on Tuesday on heavy volume, which indicated the Street leaning long into the report, which could accelerate downside selling pressure.
RH Price Action: Apparently Ryniec was not the only one who interpreted the call in a very negative way. After a much lower opening Wednesday ($353.51 vs. $385.59), RH had a brief rally to $358.98 and then resumed its move lower.
It has continued to make new lows for the session, with the current one being $335.10 as of 11:45 AM EST. The stock was down 12.63% at $336.99 in afternoon trading.
Photo by Restoration Hardware via Wikimedia.
