Since September 3, Five certainly has been a momentum stock. I like the business model and competitive barriers. The technical’s are beginning to flash caution signals. The fast and slow stochastics are each over 90. A level above 75 suggests an overbought situation. The PEG or ratio of PE to Growth is 2.06, a level of 2.0 is a stock priced for perfection. Any news hinting less than accelerating growth in revenues, earnings, same store sales can cause the stock to correct from 15%-30% in a heartbeat. Please also consider that Advent International, with nearly 1/3 of the outstanding shares has been an aggressive seller. This puts downward pressure on stock appreciation. Additionally, 16.2% Short as a % of Float in Five is also a tell. 10% is frequently the threshold for concern.
At yesterday’s $ 48.56 close, the stock was well above it’s $ 36-$ 37 support and could be poised for a correction precipitated by shorts, profit taking, Advent International or other early investor liquidation, or a broader market pullback caused by external events. FIVE is down 1.65% today, the correction may already have begun.
The external environment over the next two weeks is perilous. Next week the Federal Reserve decides on tapering, the week after congress tackles the extension of US debt limits, and Syria remains a near term wild card.
Five Update....7.1 million share secondary announced today by Five Executive Chairman and Advent International. Subsequent to the SPO Advent will still be the largest share holder with approx. 20% of the outstanding shares. This large overhang puts downward pressure on stock appreciation. Additionally 5 officers and directors along with insiders have recently sold 31 million shares in 21 separate transactions @ prices ranging from $ 34- $ 47.
I am waiting for a pullback to $ 35.80- $ 36.40 recent support levels that is likely to be tested within the next two weeks.
I agree with your thesis that FIVE is a good medium to long term buy, but has gotten ahead of it's skiis in near term pricing. If the stock does not reverse the decline, exceeded 2%, and close positive for the day, a more pronounced correction is likely. The combination very high short interest, PEG stretch, the real possibility of stops kicking in, and a challenging external environment over the next several weeks, suggest a short term reversion back to $ 36- $ 37 is reasonable
Since September 17 FIVE is consecutively registering lower high's and lower low's on very high confirming volume. FIVE fell even as the broader market realized a FED inspired RIP.
As previously indicated the lift to the S&P from external events is likely to become much less certain through the remainder of September as the expiring federal budget, sequester, and US Government debt limit are fought out in a very public and messy manner.
Based on the weakness that FIVE has evidenced over the past few days, testing $ 35.80- $ 36.40 support levels this month remains likely.