Hot Stocks — Nutrisystem (NTRI)
Last week, Nutrisystem (NTRI) shares gained an impressive 20%, fueled by — and in front of — last quarter’s earnings report. Revenue was up 16% on a year-over-year basis, while earnings turned positive, to a profit of one cent per share of NTRI stock versus a loss of two cents in the same quarter a year ago.
It was the company’s fourth straight earnings beat. Better still, the last four quarters suggest that the company’s sales and earnings deterioration may finally be winding down, with analysts projecting growth on both fronts this year. Throw in the short interest of a little more than 20% of the float, and it’s no surprise that Nutrisystem tops the recent list of hot stocks.
So why is it not apt to remain hot? In the shadow of a very-near-term 20% gain, there’s just not much meat left on the bone to enjoy. NTRI stock isn’t a name that’s followed through on most its recent earnings-related pops, and even though the company appears to be in the midst of a true turnaround story, it’s always tough to convince new buyers to keep wading in when a stock looks this overbought.
Just as importantly, the chatter and euphoria surrounding the story stock have reached dangerous proportions. When investors and the media and analysts are all singing the same bullish song in pitch-perfect harmony, odds are good that all the would-be buyers are already in a position, with few — or none — left to continue bidding the stock up.
That said, NTRI stock would be a nice pickup were it to slide back to the $14.00-ish area.