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BA   175.50 (+0.03%)
QQQ   273.47 (+0.59%)
AAPL   461.35 (+2.06%)
MSFT   209.90 (+0.34%)
FB   261.45 (+0.60%)
GOOGL   1,520.00 (+0.85%)
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The Container Store (NYSE: TCS) Stock Building Steam for a Larger Rally

Monday, July 13, 2020 | Jea Yu
The Container Store (NYSE: TCS) Stock Building Steam for a Larger Rally Storage products retailer The Container Store (NYSE: TCS) shares have languished throughout 2020 falling with the benchmark S&P 500 index (NYSEARCA: SPY) but not participating in the rally back to -pre-COVID levels until recently. The market is questioning whether TCS is a pandemic benefactor due to its 93 brick and mortar stores but is reconsidering the utility of products during lockdowns and the efficiency of their online commerce. Risk tolerant investors should pay closer attention to the basing for potential breakouts on this overlooked retail comeback story.

Q4 FY 2020 Earnings Release

On May 12, 2020, TCS released its Q4 fiscal 2019 financial results for the quarter ending Mar. 28, 2020. The Company reported Q3 revenues of $241.3 million, down (-4.7%) year-over-year (YoY) primarily impacted by COVID-19. TCS estimates comparable store sales to decrease (-3.6%) but Custom Closets sales to increase by 1.5%. Stores were closed starting near the end of March under lockdown restrictions and 51 stores were closed at least 1-day in the quarter. The Company highlighted how its products accommodate the stay-at-home trend. As consumers spend more time at home, TCS items help organize space and time as they shift marketing efforts to underscore this point. They also enhanced its online tools and services including virtual in-home design services from their Custom Closets services.

COVID-19 Effects

In an effort to combat and soften the effects from COVID-19 spread and isolation mandates, the company drew down $50 million of its credit revolver leaving an outstanding balance of $78 million. The cash balance at the end of the quarter was $67.8 million with total debt of $335 million and remaining liquidity including cash of $96.4 million. To continue cost-cutting and cash preservation, the Company also reduced base salaries up to 45% of executives and certain employees. Executive bonuses for 2019 were also deferred. TCS stopped or reduced all discretionary spread across all areas of business, lowered CAPEX spend to essential items, and extended payment terms for most goods and services. They also reduced merchandise purchases and lowered inventory levels.

May 2020 Update

The Company gave an update as of the close of Q1 on March 28, 2020 to April 25,2020. Due to store closures, retail sales were down (-45%) YOY, which doesn’t include $11 online sales not yet delivered due to surge in demand. Combined sales indicate TCS is maintaining 76% of YoY sales for the same period. They do stress that the online orders must still be distributed to customers in order to collect the revenues. The takeaway here is that online sales are strong, but distribution has been the issue due to shutdowns of brick and mortar stores. Fast forward to July 2020 and all 93 stores are up and operating. This is what investors should be keeping an eye on. The online sales were strong, but their distribution channels are re-open due to the lifting of isolation mandates.

The Container Store (NYSE: TCS) Stock Building Steam for a Larger Rally

The Container Store Price Trajectories

Using the rifle charts on monthly, weekly, and daily time frames provides a broader view of the landscape for TCS stock. The bullish monthly market structure low (MSL) triggered above $3.19 hitting a ceiling at the $4.10 Fibonacci (fib) level. The weekly stochastic formed a bullish stochastic mini pup up through the 20-band making an oscillation to the 60-band before stalling out as shares slipped back under the monthly 15-period moving average (MA) at $4.30. What makes this spike unique is that it formed at the bottom of the monthly stochastic enabling it to not only cross back up but also form a mini pup. The caveat here is that the monthly stochastic is still under the 20-band. This means it’s relatively still priced cheap but is also vulnerable for a rejection at the 20-band to cross back down if the weekly stochastic crosses back down. Opportunistic pullback entry levels is at $3.57 fib, $3.38 weekly 5-pd MA, $3.19 monthly MSL trigger and the $3.01 fib. The weekly Bollinger Bands (BBs) may be starting its expansion phase as the upper envelope turns up and lower envelope turns down. The upside trajectories on this one point to the $5.21 super fib, $6.22 fib and $7.37 fib. If the monthly downtrend is turned around, then further upside to $8.36 super fib would be possible which is the June 2019 levels. The Company is set to report earnings in early Aug 2020. Shares have recently spiked on no news so best to get an opportunistic pullback to scale into. 

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Container Store Group (TCS)1.4$3.33-1.8%N/AN/ASell$3.00
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6 Gambling Stocks Ready For a Rebound

If you didn’t believe that gambling stocks are a worthwhile investment, consider this. The Business Research Company projects the global gambling market to reach $565.4 billion through 2022. That assumes that the industry will continue growing at is annual rate of 5.9%.

The gambling industry is composed of many segments. There are casinos, lotteries, and the now legalized segment of sports betting. But gambling is also broken down into offline gambling, online gambling and even virtual reality gambling. In fact, virtual reality gambling is projected to grow at an annual rate of 21.5% until 2022.

But virtual reality is only one of a number of emerging technologies that are changing the “traditional” face of the gambling industry. There are now hybrid games – the combination of online and land-based games and even augmented reality games. And don’t forget about fantasy sports. Fantasy sports has created an entire industry and it wasn’t created for one person to have bragging rights over their buddies. Fantasy sports is a multi-million industry.

But like many other segments of the economy, gambling stocks were hit hard by the Covid-19 pandemic. Not only were casinos closed, but live sports were also put on hold. This dried up many of the traditional avenues of gambling, and gambling stocks sank lower as a result.

However, the global economy is starting to re-open. And while it was thought that casinos would be one of the last to come back, there are casinos that are starting to re-open. And, it’s becoming more and more likely that there will be live sports (likely without fans initially) sooner rather than later. And that will open up the fantasy sports market.

These stocks tend to move quickly. So now is the time to take action. That’s why we’ve created this special presentation that highlights 6 gambling stocks that are ready for a rebound. The sell-off was real, but so will the comeback. And when it does, these stocks may cost much more than they do now.

View the "6 Gambling Stocks Ready For a Rebound".

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