Why Is Dying Mall Operator Dillard’s Up 100%? Blame Reddit.

Chances are high that many posters on r/WallStreetBets have never even been inside a Dillard’s (NYSE:DDS) department store. However, that is not stopping DDS stock from joining the Reddit-fueled rally on Wednesday. Shares are up nearly 100% for the year to date, and another 10% today.

Dillard's (DDS) storefront with trees and shrubs around entrance

Source: APN Photography / Shutterstock.com

For those less familiar with the mall operator, Dillard’s has been around since 1938. Its stores sprawl across nearly 30 states, with high concentrations in Texas and Florida. Once a ubiquitous anchor in shopping malls, the upscale department store has struggled like many of its other brick-and-mortar retail peers.

Covid-19 has not been kind to brick-and-mortar retailers. Consumers were already turning away from malls in favor of websites and mobile apps. The pandemic accelerated that reality, closing non-essential stores and pushing out tenants. Amazon (NASDAQ:AMZN) led the way forward with its e-commerce operations. Retailers that followed, introducing innovations to the shopping experience, have similarly found success. Dillard’s is not exactly known for e-commerce, or for the modern shopping experience.

Inspired by the success in companies like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), investors are taking DDS stock higher. So what do you need to know about the turnaround story?

Simply put, r/WallStreetBets and the Reddit stocks rally is taking DDS stock higher. Even beyond the potential for a real retail turnaround, it looks like a powerful short squeeze is underway.

A Short Squeeze Takes DDS Stock Higher

Those familiar with the Reddit rally are likely familiar with the turnaround component. Investors hope that GameStop will embrace e-commerce, and that AMC Entertainment will make a comeback from Covid-19 closures. For Dillard’s, there is also some hope that the retailer can rebrand and come back stronger. Its third-quarter earnings report brought $31.9 million in net income, up from $5.5 million in the prior year. Deutsche Bank analyst Paul Trussell, a noted DDS stock bear, has started to back down. Trussell recently raised his price target from $31 to $60.

But more importantly, a huge part of the Dillard’s free float is being sold short. If you back out 7.4 million shares that Newport Trust Company holds, there are 5.4 million shares in the free float. Of those, there are 4.4 million shares of DDS stock being sold short. Given the short squeeze underway, it looks like Dillard’s could very well be the next GameStop.

Investors are already taking notice of the potential here. As Avi Salzman wrote for Barron’s, Dillard’s is one of the Russell 2000 stocks with the highest short float. Because of this fact alone, that means it should be on your radar. If r/WallStreetBets latches on more strongly to DDS stock, it could soar.

So what should you do here? Do your own research, and proceed with caution. The power and the risks with these high-flying names should not be understated.

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Sarah Smith is a Web Content Producer with InvestorPlace.com. 


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/dds-stock-dillards-blame-reddit-short-squeeze-wallstreetbets/.

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