As the company’s name implies, XpresSpa (NASDAQ:XSPA) offers spa services — or at least, that’s what it used to do. When the name shifted its business model to provide Covid-19 testing in U.S. airports last year, this created a flurry of interest in XSPA stock.
Perhaps XpresSpa does still offer spa services, but you don’t hear much about that from the company. After all, the world is focused on the pandemic and investors want to see how companies are responding to the crisis.
Fortunately, recent developments tend to indicate that XpresSpa is expanding its market presence as a novel-coronavirus-testing provider in U.S. airports.
On the other hand, the stock shares are still far below their high point from last year. Is this bearish, or a bargain? Let’s dive into XSPA’s technical aspects and see what we can deduce.
A Closer Look at XSPA Stock
In the interest of fairness, I must begin with one of the more unsettling aspects of XpresSpa. Namely, on a trailing 12-month basis, the company has earnings of -$3.01.
That’s not particularly encouraging as XSPA is priced at less than $2 per share. When the earnings per share are negative, with the absolute value being greater than the share price, that could be a red flag.
For that reason alone, I would recommend only taking a small position in the stock — if you choose to take a position at all.
Now, though, let’s address the price movements. On Jun. 5 of last year, XSPA stock rocketed to a 52-week high of $8.82. Fast-forward to today, however, and the share price is about $1.82. Therefore, the bulls should target $2.50 and then $3.25 over the next couple of months.
Retaking the $8 level will require a lot of effort from the bulls and perhaps some good news from the company. But then again, this company already has some positive developments that shareholders can celebrate.
Welcome to Newark, Again
One thing that I respect about XSPA stock is that it represents a business that’s willing to specialize. Right now, the company focuses on setting up its XpresCheck Covid-19 testing facilities in U.S. airports — a specific niche, indeed.
There’s an old saying in real estate that applies here, though: location, location, location.
I would apply this same principle to XpresSpa’s business strategy. Certainly, leveraging high-traffic sites will be essential to generating strong revenues. So, right now, location is paramount to this company.
XSPA seems to be taking that to heart. For instance, it’s establishing a second XpresCheck testing facility at New Jersey’s Newark Liberty International Airport.
Reportedly, this new testing center will host four different testing rooms and be able to perform more than 300 tests a day. Furthermore, there will be multiple testing options for Covid-19 at the new location — both “the Rapid Molecular COVID-19 Test and the Polymerase Chain Reaction (PCR) Test.” This expanded capacity in such a high-traffic location should work wonders for the company.
Potentially Lucrative Contract
On top of that development in Newark, XpresSpa recently signed a contract with the Metropolitan Washington Airports Authority.
This contract will reportedly allow the company to establish XpresCheck Covid-19 testing facilities at two popular airport sites — the Dulles International Airport and the Reagan National Airport. Both of these locations are expected to be fully operational by mid-March.
These testing sites should generate strong revenues for the company. The Dulles location will have an anticipated capacity of 500 tests a day, while Reagan’s XpresCheck should be able to handle 300 tests per day. So, with additions like this to the company’s offerings, XSPA stock is better equipped to do well.
Don’t get me wrong, XpresSpa is still a small company. But its expansion rate is impressive. Investors should keep an eye out for further developments and, hopefully, more high-traffic testing sites.
The Bottom Line
Maybe it will be possible for the XSPA stock bulls to reclaim the $8 level in 2021. Really, only time will tell.
At the very least, though, $3 should be attainable. Anything’s possible when a company’s making the right moves — and establishing itself in the right locations. XpresSpa appears to be doing just that.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom 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.