Bear Of The Day: PLBY Group (PLBY)
PLBY Group (PLBY) is a Zacks Rank #4 (Sell) and I am making it the Bear of the Day today. I can hear it already as I write this the day before and the stock running more than 20% higher for the second day in a row…. HOW CAN THIS STOCK BE THE BEAR OF THE DAY???? Well sometimes I use the Bear of the Day as a means of highlighting why these articles are written and at the same time there is a chance to point out where there could be some mistakes.
I did this once before with WTER, highlighting why the stock slipped to a Zacks Rank #5 (Strong Sell) and why I believed that the company was worth a deeper look. WTER remains on my sonar … I mean my radar screen to this day. PLBY is another instance.
Description
The Playboy brand has been around for decades and most of you probably know all about it. It was the classy adult entertainment magazine that had a next generation style leader in Hugh Hefner. The brand expanded to pay per view TV, then a show on basic cable about the Hef’s 3 girlfriends. All the while the company saw the bunny ears brand find its way in all sorts of clothing.
Fast forward to today and we have a SPAC that is seeing some really interesting moves. The stock is running and that alone does not mean its time to sell it or that it should be the bear of the day. The reason the stock is the bear of the day is due to the earnings estimate revisions.
Earnings History
The Zacks Research System doesn’t show any earnings history for PLBY. The company listed on the NASDAQ in February after combining with blank check company Mountain Crest Acquisition Corp. That deal brought in $100M for PLBY and so far there hasn’t been an earnings report.
I see an earnings report came out in March and it had the company poisting $46M on top and a loss of $512K. That was considerably better than the $21M on top and $6M loss in the year ago period.
The earnings history is important, but it isn’t the biggest factor that changes the Zacks Rank.
Earnings Estimate Revisions
I only see two estimates, so the likely scenario is that after one estimate came out, the next one was lower and that caused the consensus to drop. That is what the Zacks Rank is all about… looking at the movement of earnings estimates. When the estimates move lower the Rank follows.
This quarter has moved from 4 cents to 3 cents.
Next quarter was 7 cents but now its 4 cents.
This year is looking at a gain of 29 cents, but it was 35 cents.
Next year the analysts have a gain of 47 cents and that is down from 53 cents.
I am not picking on these analysts… but these numbers are very, very low. That said, these estimates came out before the NFT craze hit and the company announced it was getting into the mix.
Valuation
So how do you like the valuation now? I see a 90x forward earnings… but that earnings number could easily triple if the company executes on an NFT strategy for the library of photos that the company has. I see a 3.4x price to book… but that number will change drastically too. At the end of the day, the licensing of apparel is being brought in house and that alone will drive earnings much higher down the road. I see this stock heading towards $100 or more.
So This Is A Bear Of The Day?
The point of the bear of the day article is to look at what the Zacks Rank is doing. Why is the Zacks Rank moving the way it is and hopefully explain the usefulness of the Rank. From time to time we find great opportunities to talk about how these little anomalies make a stock that looks great actually showing a weak Rank. I hope I explained why it’s a Zacks Rank #4 (Sell) and why I believe that it will soon be a Zacks Rank #1 (Strong Buy).
Chart
PLBY Group, Inc. Price and Consensus
PLBY Group, Inc. price-consensus-chart | PLBY Group, Inc. Quote
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