Veteran analyst thinks this stock could be the next meme-stock short squeeze

Let's take a sentimental journey and renew some old memories.

Back within the day — specifically Feb. 13, 2020 — the singer and actress Jennifer Lopez joined with retailer Dressmaker Brands (DBI) to announce the JLO Jennifer Lopez collection, a line of footwear and purses.

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"Since the start of my career, I've desired to do all of it — music, movies and fashion,” Lopez said in a news release. “There are such a really good deal of facets to my career, and which is what I desired to bring to my collection with DSW.”

Oh, we were so young and innocent back then. Who may perchance've known that just a month later, states would start off implementing shutdowns to steer clear of the spread of Covid19-19?

And who may perchance've predicted that the following year Lopez would come again along side Ben Affleck (for a pair of minutes, anyway)?

And who may perchance've perchance foreseen that within the Year of Our Lord Bennifer 2.0, the investing world will be upended by the meme-stock frenzy, where Reddit users within the r/Wallstreetbets forum got in the back of struggling videogame retailer GameStop (GME) , which was being heavily shorted by hedge funds?

Dressmaker Brands CEO: improvement 'muted'

Other stocks, including AMC Entertainment (AMC) , Blackberry (BB) , Nokia (NOK) and Bed Bath & Beyond (which later went out of business) were soon added to the manic mix.

A learn about by University of Michigan Law School cautioned against viewing the meme surges on 2021 as simply the manufactured from the Covid19-19 pandemic or Reddit social boards.

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"Instead, systematic digital transformations in all facets of the financial markets have allowed retail investors to coordinate their expressive preferences for companies," the report said.

Among other factors, the learn about said major online brokerages without warning abolished commissions in 2019, which encouraged many more retail investors to participate within the stock market.

"Meme trading is here to stay," the report said.

And meme trading may maybe be a problem with Dressmaker Brands, in accordance with TheStreet Pro's Stephen Guilfoyle, who noticed the Columbus, Ohio, retailer's stock was up recently even the corporate's 2d-quarter results "were now not pretty."

Dressmaker Brands' earnings and sales figures were down from the previous year and fell short of expectations

The company, which owns the Dressmaker Shoe Warehouse chain, also lowered full-year guidance, decreasing its full year net sales growth outlook to “flat to low-single digits” % from “low-single digits.”

Right all through the 11th of September earnings call, Chief Executive Doug Howe told analysts that the corporate "made continued progress on our plan to come again Dressmaker Brands to growth."

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"As anticipated, we did see consistent improvement in our top-line performance all all through the quarter and have now experienced three consecutive quarters of sequential comp improvement," he said.

He noted that "we have now been specifically pleased with our back-to-school business, which has carried its momentum into the 1/3 quarter supported by our expanded athletic and athleisure offerings."

"However, with consumers being increasingly more mindful of their discretionary spend, that improvement has been more muted than anticipated," Howe said.

Telsey Advisory lowered its price target on Dressmaker Brands to $6 from $10 and kept a market-perform (effectively neutral) rating on the shares.

Whatever the shortfall of the Q2 results in comparison with market expectations, the corporate was "specifically pleased" with its back-to-school business, the investment firm said.

With the challenging macroeconomics and footwear market, however it, visibility to achieving the prior FY26 targets on the original timeline remains demanding, Telsey said.

Veteran trader sees 'that you are going to be in a position to assume pain trade' in Dressmaker Brands

Guilfoyle noted that Dressmaker Brands' quick ratio, which measures a corporation's ability to meet its short-term obligations with its most liquid assets, "stands at a paltry 0.25."

"Now, we in most cases cut retailers some slack on their quick ratios on account of the inventory-centric nature of the business," he said. "But we're a bit concerned here as its cash balance is down 21% since February, while inventories, whose values often depreciate over time, are up 12.5% over that very same time period."

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Dressmaker Brands was down 1.7% at last check, but Guilfoyle noted that the shares were up 8% on Sept. 17, up 2.24% within the previous session and up eleven.73% within the one before that.

"It be incredible," he said. "Why is that, after posting lousy numbers for the quarter, cutting guidance and running negative free cash drift for the past six months?"

Guilfoyle said that as of Aug. 30, nearly 94% of the complete DBI drift was held in brief positions.

"While I see absolutely no reason to place money into this stock, there may maybe be a trade here," he said.

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Guilfoyle discussed the stock's simple moving average, which calculates the common price all through a specified period and will assist determine whether an asset price will continue or will reverse a bull or bear trend.

"With the stock's 50-day [simple moving average] nearby, a jump over that hurdle may perchance in point of fact scare the stuffings out of the shorts," he said. "You may deal with to have something along the lines of a potential meme-stock situation here."

Which is now not a "set it and forget it" situation. Guilfoyle explained, adding that "one who gets long something for a trade will should either set stops because the stock rises or remain kind of attentive."

"I might now not call this chance knocking, no not so far not within the conventional sense," the veteran trader said. "What it be is a probable pain trade for some other person as a way to perchance turn a brief buck for those on the ready."

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