Just a few short weeks ago, airport spa company XpresSpa (NASDAQ:XSPA) looked as if it was on the verge of disaster. Airport traffic nearly disappeared thanks to the novel coronavirus pandemic and XSPA stock was on the verge of being delisted.
Fast-forward to today and XpresSpa has a new lease on life. The company is pivoting to a new business plan that potentially gives it a unique advantage in the age of Covid-19.
Less than a month after undergoing a painful 1-for-3 reverse stock split, XpresSpa says it’s in a much better position today, making XSPA stock an interesting growth play as we head into the second half of 2020.
XpresSpa’s Business Shift
Before the coronavirus pandemic, XpresSpa operated airport spas in 21 U.S. airports, as well as in the Netherlands and the United Arab Emirates. Travelers could get anything from massages to facials and manicures, as well as waxing and hair services.
But the Covid-19 pandemic put an end to all of that. Not only did air travel come to a virtual stop, but the contagious nature of Covid-19 made manicures, facials and massage services impossible.
By March 24, XpresSpa closed its airport locations, essentially shutting down its revenue stream. It announced plans to launch an XpresCheck brand instead, in hopes of partnering with companies to offer Covid-19 tests at its airport locations.
By early June, XSPA signed a deal with a marketing company HyperPointe, to support the XpresCheck business. The company has since launched a pilot program at John F. Kennedy International Airport in New York to test airport employees and passengers. It’s able to conduct 500 tests per day.
“We believe we have a significant role to play in the fight against COVID-19 given our airport relationships, infrastructure, workforce, and strong desire to keep travelers and the entire airport community safe,” XpresSpa CEO Doug Satzman said.
XSPA Stock at a Glance
To be frank, the company’s spa business was never a winning formula. Even before the coronavirus pandemic, XSPA stock languished below $1 per share. In January, the company received notification from Nasdaq that it was at risk of being delisted because of its weak share price.
The deadline set was June 30.
Faced with the delisting threat and then the coronavirus shutdown, XSPA really had no choice but to carry out a reverse stock split to maintain compliance with Nasdaq. That action, a 1-for-3 split, took effect June 11 and immediately pushed XPSA stock to more than $5 per share.
Since then, XSPA stock fell 25%, but at least it is not in any danger of a delisting now. And the steps that it’s taking is helping to solidify the company as it shifts from a spa services company to a Covid-19 testing center.
Stronger Financial Footing
In a financial update filed this week with the Securities and Exchange Commission, CEO Doug Satzman said XpresSpa managed to secure a stronger financial position, thanks to new investments and debt reduction.
Holding only $3.9 million in cash and cash equivalents on March 31, XpressSpa says it raised $43 million in the second quarter, as well as reducing debt by $9.1 million:
“The approximately $48 million in gross proceeds that we have raised since January, through a series of registered direct equity offerings have been truly transformational for XpresSpa and we appreciate the investment community’s confidence in us as we work to reimagine our health and wellness service offerings. These series of transactions have substantially strengthened our financial condition and enhanced our flexibility by significantly increasing our cash position. Our near-term objective with these proceeds is to explore emerging health and wellness opportunities that we can rollout to our portfolio as well as consider additional COVID-19 testing sites through our XpresCheck brand.”
The Bottom Line on XSPA Stock
The company’s previous business model of offering massage, facials and hair care services at its airport locations wasn’t working, that much is clear. People at airports just want to get to their destination and often don’t have the time or inclination to stop for a spa treatment.
But as a Covid-19 testing center, XpresSpa is a much more interesting company offering essential services that can be regularly used by travelers and airport employees. The coronavirus pandemic looks to be with us for a long time to come and there will be a need for people to be tested before they travel in such tight quarters on a jet.
XpresSpa is in discussions with other airports to expand its pilot program outside JFK. If it is able to duplicate its testing business at other airport locations, XSPA stock could be an interesting growth play.
Right now, the stock has a “B” grade in my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
