Hibbett, Inc Is A Short-Squeeze Candidate
Shares of Hibbett, Inc (NASDAQ: HIBB) attracted quite a crowd of short-sellers over the last quarter due to rising fears of supply chain disruption and inflation. Those fears have the short interest up to nearly 20% which we view as extreme. Especially considering the strength of the Q3 results and the outlook for the rest of the year. In light of those results, we view this stock as a high-probability candidate for a significant short-covering rally if not an outright short-squeeze. Trading at only 6X its earnings it is a deep value and one set up to outperform in 2022.
Hibbet, Inc Sets New Q3 Record
Hibbet, Inc had a strong quarter indeed and one that proves supply chain issues are slacking for some if not the cost of shipping. The company turned in $381.79 in net revenue which is good for a gain of 15.2% over last year and beat the consensus estimate by 650 basis points. The revenue is up 38.6% in the two-year stack and strength is expected to continue this quarter as well. On a same-store basis, comps are up 13% YOY and 37.4% versus 2019 with YTD sales up even stronger. On a YTD basis sales are up 24% YOY and 52% in the two-year stack with both traffic and ticket averages playing a role.
In terms of stores versus eCommerce, sales were strong in both segments although eCommerce continues to gain traction. Comps at brick&mortar locations are up 11.6% versus last year while eCommerce is up 23.3% YOY and 85% versus 2019 with the contribution to the net on the rise.
Moving down, the gross margin came under pressure but was offset somewhat by a reduction in SG&A as a percentage of revenue. The gross margin shrank 200 basis points to 36.3% but was far better than what many had been expecting, not to mention there was a significant increase in inventory as well. Inventory is up 22% and has the company in a good position for the holidays and winter sports season. As for earrings, the $1.68 in GAAP and adjusted earnings beat the Marketbeat.com consensus by $0.26 and $0.07 respectively.
Hibbett, Inc Raises Guidance
Hibbett, Inc issued updated guidance for the 4th quarter and it is very positive. The company is expecting $1.85 to $2.05 in Q4 earnings which implies a full-year total of $11.70 to $11.90 compared to the consensus estimate of $11.39. The analysts are bullish on the stock but, ironically, the most recent activity was bearish. Bank of America analyst Alexander Perry downgrade Hibbet to Neutral from Buy the day before earnings were released. The move seems premature to us but includes a price target that is still more than 10% above the current price action. The Marketbeat.com consensus, however, assumes a robust 50% of upside for the stock and we think it could go higher.
The Technical Outlook: The Shorts Are Having A Field Day With Hibbet, Inc
The short-sellers are out in force despite Hibbet’s strong showing. Price action popped in premarket trading but was met with such a ferocious round of selling it quickly reversed and moved lower. The bad news is that price action set a new 9-month low. The good news is that price action is overextended within a range, piercing a zone of support, and ripe for a rebound. Assuming support holds within this range, we see short-covering begin and spark a rally that could quickly gain momentum. If not then Hibbet, Inc could be in for a very big decline but we don’t see that in the cards.
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