It feels like investors in XpresSpa (NASDAQ:XSPA) stock are the same kind of speculators who might buy into shares of Kodak (NYSE:KODK). The parallels between the two companies are fairly salient. Both KODK and XSPA stock were circling the drain but have come to grab headlines and confound analysts. And both have managed to spin the pandemic, becoming some warped vision of pivoting, pandemic champions.
Both firms also helped brash short sellers make lots of fast money.
But neither is worth wasting your money on. And although I wouldn’t recommend it at all, investing in a Kodak pivot into pharmaceuticals makes much more sense than investing in an XpresSpa pivot into a coronavirus testing provider. Film chemicals have overlap with the generic drugs Kodak is attempting to produce.
XpresSpa has floor space in airports where testing can be undertaken. That’s pretty much it.
XSPA Stock’s Laudable Effort
Investors should give XpresSpa some credit. The company has taken a bad situation and attempted to turn it into a positive.
On March 11, WHO declared Covid-19 a pandemic, and as a non-essential business, XpresSpa was forced to shut down March 24. So management took lemons and tried to make lemonade. On May 22, XpresSpa announced a deal with JFK International Air Terminal to pilot a program for Covid-19 testing. Kudos to that.
Markets would have understood if the company had bowed out, using the pandemic as the straw that broke the camel’s back. But that isn’t what XpresSpa did.
If things work out for XpresSpa, it will be able to somehow expand this pilot program into a full-fledged business. It will provide Covid-19 testing across its U.S. airport spa locations and perhaps internationally.
And then? Does XpresSpa intend to become a diagnostics center? The pandemic isn’t going to last forever. Investors then have to assume that the company will return to its core spa services business.
Investors shouldn’t be interested in buying into any of that.
XpresSpa’s Bull Thesis
Thus, the underlying bull thesis for an XSPA share purchase has to be that the company can expand this pilot program. Investors then believe the stock will rocket upward leading to massive profits. That part makes sense. Investors must have that as their ultimate goal then.
Investors would then have another problem.
Because it would seem that if all of that happened, investors would sell in order to book profits. All of the ensuing selling would drop the price quickly. Markets would then see a step-wise decline in prices because there isn’t really any long-term plan here for this business pivot. And as markets are well aware, XpresSpa’s core business isn’t strong.
Therefore, the company’s 15 minutes are likely up.
There are a lot of strange things that have happened in 2020. The fact that JFKIAT gave XSPA a chance with a pilot program will likely simply be a footnote. Press releases have ignited a lot of movement during the pandemic — movement that wouldn’t have occurred in normal markets and in normal times. That press release was probably all the positive news that will come out of this company and the sole catalyst.
To potential investors who still want to take a shot, do yourself a favor and read XSPA stock’s latest 10-Q. Start on page 29 at management’s discussion and analysis of financial conditions.
As of this writing, Alex Sirois did not own shares of any of the aforementioned stocks.
