To the market, Naked Brand Group (NASDAQ:NAKD) and shares of NAKD stock aren’t worth the energy it takes to swat a lazy fly. And the market is right.
This is a company that should have been delisted from the Nasdaq exchange two years ago. It deserved that fate. But, through some wily actions, Naked Brand Group managed to push its stock price above the $1 minimum in time.
Now let’s be clear. All it takes to avoid the danger zone is decent fundamentals and performance. And exchanges give companies lots of time to get their house in order and meet minimum requirements.
Obviously, since Naked Brand Group is flirting with delisting again, the company didn’t straighten things out.
The Perils of NAKD Stock
In this world, there are penny stocks and there are penny stocks. While a “penny stock” is defined as one trading for less than $5 (which is a whole lot of pennies), there’s a universe of penny stocks that actually trade for pennies.
To me, these stocks are a waste of an investor’s time. The allure of scoring big with these terribly cheap equities is misleading. A person would be better off to go to a convenience store and treat themselves to a lottery ticket and an ice-cold soda. At least they’d have some liquid refreshment to show for their trouble and maybe help fund a worthy state service in the process.
NAKD stock is a true penny stock. It is trading around 53 cents per share.
I will duly note that the price, such as it is, has climbed in recent days. Nothing happened to justify the rise, but remember it doesn’t take much to get a penny stock to increase a few cents.
Over the last year, NAKD stock climbed as high as $2.62 a share. It’s low was six cents, which likely induced nausea in several shareholders. A price of six cents is the definition of a low point. Reaching that mark is not a sterling accomplishment, but it sure is noteworthy.
Moreover, it’s a warning to investors to stay away.
Naked Brand Group at a Glance
Headquartered in New York, Naked Brand Group is a New Zealand company that makes and sells lingerie. Swimwear and other apparel products. There are several brands in the Naked Group stable, including Frederick’s of Hollywood. Others include Bendon, Lovable, Naked and Davenport.
The company’s products are sold online, in department stores, some specialty stores and its own string of Bendon stores in Australia and New Zealand.
Although it is selling products, the company’s momentum does not inspire confidence. During its 2020 fiscal year, Naked Brand reported net sales totaled $58.5 million. That is a hefty decrease from $72.7 million the year previous. The comparison comes a whopping $14.2 million short.
The Delisting Threat Is Real
May 24, 2021, is a big day for Naked Brand Group. Executives should have it circled in bright red on their calendars. That is the deadline set by Nasdaq officials last November for the company to demonstrate consistent prices above the $1 mark.
The company has been here before.
In 2019, Naked Brand was facing delisting. But executives steered the company around it by conducting a reverse stock split. And, since the company doesn’t seem to have much creativity in its inventory, it likely will do a reverse split again.
What’s the effect of delisting? That would force the company to trade its lackluster penny stock on the over-the-counter market. The move would reflect the stock’s diminished – non-existent? – prestige.
Some observers say the stock’s recent moves north show optimism it will somehow blossom. That may be true, but the optimism is misplaced. I think it’s more like what my InvestorPlace colleague Lou Carlozo says in a recent pun-filled article.
Says he, “More likely, the company is floating next to lifelessly, waiting for something, anything to put it out of its misery.”
The Bottom Line
Naked Brand Group is an intimate apparel company whose stock is flirting with being worthless. Even after a recent rally, NAKD stock is trading around 50 cents.
Don’t waste your time and money on NAKD stock. If it’s in your portfolio, sell and focus on worthwhile equities. If you don’t own NAKD shares, pat yourself on the back and have a good day.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C. and began writing for InvestorPlace in 2020.