Floor & Decor Holdings Inc

Floor & Decor Holdings Inc (Nasdaq: FND) is a speciality retailer that provides hard surface flooring. It also provides decorative materials and related accessories. On 5 August 2021, FND expects to hold its Q2 FY21 earnings call.

Investment Highlights – SELL at USD 124.86

• FND’s stock price has yielded a remarkable return of over 82.60% in the past year, giving an attractive opportunity to book profit.
• The overstrained share price might suffer with derailed economic recovery and possible monetary tightening.
• From a technical standpoint, 14-day RSI (77.58) seems unfavourable and doesn’t support the stock price's upside potential. Moreover, the stock price is trading close to the upper Bollinger Band, reflecting an overbought position.
• On forward 12-month basis – EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book valuation multiples are overvalued against the industry median of Consumer Cyclicals sector.

Key Risks

• The resurgence in Covid-19 cases due to the Delta variant can accentuate the industry’s challenges and increase the operational costs.
• The inflationary market conditions and macroeconomic instabilities can impact the consumer’s disposable income and spending habits.

Q1 FY21 Financial Highlights (for three months ended 1 April 2021, as of 6 May 2021)

 (Source: Company Website)

• During Q1 FY21, net sales surged 41% year-on-year, while the comparable store sales increased 31% against Q1 FY20.
• Subsequently, operating income increased by 105.6% year-on-year, driven by robust sales momentum.
• Similarly, diluted earnings per share soared 102.9% year-on-year, driven by favourable macroeconomic environment.
• The Company also opened seven new warehouses during the first quarter of FY21.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (Illustrative)

Conclusion

FND’s stock price has topped 52-week high, and can face some correction from the current levels since the prices are in overbought situation. Moreover, the Covid-19 pandemic continued to cause supply chain disruption, labour shortage, and macroeconomic instabilities. Therefore, such overweighed stocks could suffer slow economic recovery and conservative consumer pockets. Therefore, it is prudent to liquidate the position in profits before the plausible share price consolidation. The stock made a 52-week high and low of USD 126.31 and USD 65.73, respectively.

Based on the exceptional notional gains, macroeconomic uncertainties, overstrained share price, and unfavourable valuation conduced above, we have given a "SELL" stance on Floor & Decor Holdings Inc at the current market price of USD 124.86 (as of 4 August 2021, 11:50 AM ET), while we look forward to reviewing the Q2 FY21 results.

Canoo Inc

Canoo Inc (Nasdaq: GOEV) develops electric vehicles and designs modular electric platforms. It delivers a wide range of vehicle applications for businesses and consumers.

Investment Highlights – SELL at USD 7.97

• Increase in cost and shortage of lithium-ion battery cells could hamper the business growth further.
• The significant delays in production and launch of electric vehicles could worsen the financial condition.
• Canoo’s share price can get hit by the lawsuit regarding its US$2.4 billion merger with a blank check Company. In addition, the Company has three other lawsuits as well in federal court for publishing misleading information.
• From a technical standpoint, stock price of GOEV is sustaining below the 20-day EMA (USD 8.42), reflecting a bearish price momentum.
• Over the past year, GOEV’s stock price has declined around 27.94%, reflecting a significant underperformance against the benchmark Nasdaq index.

Key Risks

• The ability to scale in a cost-effective manner and product development line can be distorted with operational uncertainties arising from the Covid-19 induced challenges.
• It is an early-stage entity with a history of losses. Moreover, the Company is yet to achieve positive operating cash flows.

Recent News

President Appointment: On 26 July 2021, Canoo appointed Ambassador Josette Sheeran as president of the Board.

Manufacturing Partner: On 17 June 2021, GOEV named VDL Nedcar as its contract manufacturing partner for developing electric vehicles.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 17 May 2021)

 (Source: Company website)

• During Q1 FY21, the Company did not generate any revenues; however, it was able to reduce net loss and comprehensive loss against Q1 FY20.
• It also announced an electric power research collaboration with University of Wisconsin.
• The Company also opened pre-orders for Lifestyle Vehicle and Pickup Truck.
• As of 31 March 2021, there was US$641.9 million in cash and cash equivalents.

Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (Illustrative)

Conclusion

During Q2 FY21, Canoo anticipates operating expenses to be in the range of US$65 million to US$75 million, while it estimates to incur US$45 million to US$55 million as capital expenditure. Adjacently, there are uncertainties regarding raw-material shortage and demand outlook in the short-run. Moreover, inflationary concerns could worsen the consumer sentiments, and thus, the Company might fail to achieve its desired sales. Therefore, it is prudent to liquidate the position at the current levels. The stock made a 52-week High and Low of USD 24.90 and USD 6.51, respectively.

Based on the heightened macroeconomic uncertainties, bearish price momentum, continued losses, and unfavourable valuation conducted above, we have given a "SELL" stance on Canoo Inc at the current market price of USD 7.97 (as of 4 August 2021, 11:50 AM ET), while we look forward to reviewing its Q2 FY21 results.  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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