Don’t Chase XpresSpa Stock at Current Prices

Advertisement

Prior to the onset of the novel coronavirus, there’s wasn’t a whole lot of buzz surrounding XpresSpa (NASDAQ:XSPA) stock. Mostly, the company was known as a “wellness-on-the-go” business with a primary focus on airport massage supplies.

Source: Shutterstock
The market has seen a number of businesses shift their focuses in the wake of the pandemic, but XpresSpa’s pivot has been drastic. Indeed, the days of XpresSpa as a spa-supply business are practically a distant memory at this point.

All of a sudden, XpresSpa is now an airport Covid-19 screening company. Or at least, that’s what investors are supposed to believe. And evidently many traders do believe it as the XSPA stock price has recently shot up like a rocket.

The thing to remember when a company faces hype is that stock market rockets must come down at some point. It’s exciting to consider the prospect of XpresSpa contributing to the fight against Covid-19, but caution — not frenzy — is the appropriate response now.

XSPA Stock Rallies on Airport Contract

XpresSpa joined the battle against Covid-19 in earnest back in early April. At that time, the company announced its plan to pursue Covid-19 testing and screening at airports in the United States.

In the company’s favor was its fairly expansive airport real estate portfolio. XpresSpa’s press release described this as consisting of “46 locations across 23 airports that are ready to be reactivated and redeployed in short order, subject to the approval of local airport authorities.”

Traders who jumped into XSPA stock upon that announcement doubled their investment within a few weeks. Still, as far as the price action is concerned, the biggest gains were yet to come.

In late May, XpresSpa’s foothold in the rather narrow niche got a major upgrade. That’s when the company announced that it had signed a contract with New York’s JFK International Air Terminal “to pilot test its concept of providing diagnostic COVID-19 tests” in one specific terminal.

Granted, that’s just one terminal at one airport. Still, it’s bound to augment XpresSpa’s bottom line and traders recognized this, soon bidding the XSPA share price above $1.

Another Contract Follows … and Traders Rejoice

That, right there, could have been a perfectly happy ending to the story. Traders could have booked their multiple-fold gains in XSPA stock and been content.

But of course, the story continued. As informed investors, we can’t afford to ignore the ever-present potential for high valuations to lead to even higher ones.

Thus, the $1 price level was merely a springboard for the next massive run-up in XSPA stock. The first full week of trading in June saw the shares pop to $2.87 and, at the week’s end, eventually settle at $2.37.

If you suspected that there must be a specific catalyst for this incredible price movement, you’re 100% right about that. In early June, XpresSpa announced a partnership with marketing agency HyperPointe to provide Covid-19 testing and screening in airports in the U.S.

Along with this collaboration, XpresSpa has formed a new business unit called XpresCheck to provide the Covid-19 testing and screening. XpresSpa CEO Doug Satzman described HyperPointe as an “indispensable partner” in the company’s mission to keep travelers safe:

“Their expertise in the healthcare space has helped us navigate the complexities of the industry, while assisting us rapidly adjust to the ever-changing environment brought on by this global pandemic.”

So, that’s the evident rationale for the major rally in XSPA shares after they already more than doubled. Sure, it’s good news and all, but now cautious investors must weigh the possibility of a retracement.

Profit taking can and will occur at some point. And the HyperPointe partnership is no guarantee that XpresSpa and its XpresCheck will dominate this niche. It shouldn’t be too surprising if competitors suddenly shift into this market, much like XpresSpa did.

My Takeaway on XSPA Stock

XpresSpa’s switch-up into the Covid-19 screening business was rapid and dramatic. The only thing more sudden than that was the insane price action in XSPA stock.

Feel free to buy it now if you must, but don’t underestimate the power of gravity. It’s entirely possible that the trading community has priced in the expected runaway success of XpresSpa’s collaborations, and then some.

David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarketsFinom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/xpresspa-xspa-stock-airports-rally-coronavirus/.

©2024 InvestorPlace Media, LLC