OK, last Thursday's move up on three or four times the recent trading volume was impressive and RACK did hold up well with the market tanking as options expired (go figure).
This is only speculation, but my guess would be that we may see a little tree shaking early this week. Send the price down...lose some of the weaker longs prior to earnings. Yet, I could be wrong b/c if RACK's earnings are good it will put the shorts in a bad position.
Yahoo's statistics only shows 26.4% as a short % of float statistic. But to arrive at that figure you have to add the short shares (6.8M) to the float (19.01M), which gives 25.81M shares. Divide the 6.8M number into 25.81 and you get the 26.4% statistic. But, if you don't add the short position (6.8M shares) into the float, the short % of float looks much more significant.
In other words, divide the 6.8M short shares by the 19.01M actual float and you arrive at 35.77% of RACK's shares are shorted. All I can say is, "wow" - 19.1M is not exactly a large number of shares. With $170M in cash, RACK has almost $6/share in cash alone (using the 28.62 total shares outstanding number, not the 19.01M current float) and zero debt!
RACK really had a misstep with the $10.2 million net loss in Q1 of 2007. Since then, we've seen significant change at the top. Also, the increase in headcount of 25 sales and marketing people from Q1 should begin having an impact going forward.
Can someone please tell me what I'm not seeing here? At this point in time the upside potential of RACK far outstrips the downside risk. Yes, there is tough competition, but they are competing in an expanding market which will offset some of that competitive pressure. What do you think it will take for the shorts to cover that 35.77% of float that is currently short? IMO, a buyout at prices much higher than $12.50 is much more likely than this stock dropping below $10 / share, even if RACK reports another quarter of losses. I've got to be missing something here....
Here is what I'm thinking. I only had 500 shares that I sold Thursday for a couple of hundred dollars profit. Small, I know, but I take what I can get sometimes. I have no shares at this point, though I've traded RACK several times over the last few months, taking profits each time.
Now that the options expired near the $12.50 strike price, I expect the price to drop down to the low 12s or high 11s tomorrow. I don't think it will go below the 52-week low ($11.25) prior to earnings. I am looking to buy back in at high 11s. At earnings, anything could happen of course. The quarter could be really bad, but I'm hoping the new management will have really good guidance going forward. I have to feel that they can make positive changes, or at least convey the confidence that they can. I know RACK is in a very competitively difficult situation, but from what little I can see, they have some good products that should keep them in business, or make them desirable to someone else.
I think the stock is at or near the bottom, and the upside potential is tempting. Abhorns could be right about dropping to 8 or 9, but I may take a chance on 500 to 1000 shares tomorrow, either for a swing trade or hoping to be in if a buyout comes.
Well, I guess we have the answer in the share price. We also have pointless bashers like "lcrazyloo" and "runnnezz20000000" putting in some extra effort to scare investors.
If you are a medium to long-term investor in RACK you'll be just fine. This company will do well in the coming year and beyond. However, if you are a momentum player that just joined us from last week's rise, then I'm sorry. The shorts aren't letting up until we hear earnings. You may be better off capitulating now....
With RACK trading at a Price/Book ratio of 1.06, I don't see it going down much further, but stranger things have happened. The long-term fundamentals look excellent, but that certainly didn't stop the stock from dropping from 12.50 to our current level.
I'm really interested in hearing the current status and future guidance coming out of Mark Barrenechea and crew this week! This is not going to be a boring meeting this Thursday, that's for sure.