NAKD Stock: A Day Trader’s Dream and Value Investor’s Nightmare

Naked Brand (NASDAQ:NAKD) stock is up 243.7% year-to-date, defying logic.

a man and woman wear plain white underclothes from Naked Brand (NAKD)
Source: Shutterstock

If you ever needed to understand just how powerful the average retail investor has become, look no further than this embattled intimate apparel company.

Before this rally, the company seemed on a straight path to bankruptcy. However, Redditors have miraculously brought it back to life and pushed NAKD stock to dizzying heights.

At the same time, the price movement has confounded value investors.

Every time it seems Naked Brand is down for the count, a press release turns its fortunes around, making sure every analyst or value investor worth his or her salt knows who’s in charge of the markets these days.

Recently, we saw two announcements that led to a laborious act once again. The first was a CFO appointment. The other was an update on the company’s plans to into an e-commerce business.

It goes without saying that Redditors loved both these developments. It reinforced the diamond hands narrative for NAKD stock found on the WallStreetBets subreddit vis-à-vis this contentious meme stock.

However, you have to ask yourself, has anything changed substantially for the intimate apparel purveyor?

Well, yes and no.

But the bottom line remains the same. Naked Brand is a troubled company that still has a lot to do before proving itself as a viable investment.

Until that time, you need to keep watching their press release section to see where the stock will head next.

NAKD Stock: Money Won Is Twice as Sweet as Money Earned

I have been writing on NAKD stock for a while. However, this is the first time I am optimistic regarding its prospects.

Now granted, that does not mean I rate shares a buy. But I will call a spade a spade. The company now has zero debt and $270 million in cash, a sizeable war chest for acquisitions.

On a separate but albeit equally important note, last Friday, the Auckland-based company moved further towards its transformation towards an e-commerce enterprise.

A meeting was held where shareholders voted on the transformation. According to the preliminary votes, stockholders greenlighted the move, which sent NAKD stock soaring.

My colleagues and Vince Martin and Thomas Niel have written excellent articles on the change’s schematics.

I recommend you check out those articles to understand how the new arrangement will work.

In a nutshell, Bendon, the company’s brick-and-mortar business in Australia and New Zealand, will be divested to focus on FOH Online, its e-commerce operations.

The coming Friday will see further development on the matter. Expect that to be another short-term catalyst for the stock.

Silver Linings

There are certainly reasons to be happy if you are a NAKD stockholder.

The appointment of Mark Ziirsen as the next CFO, replacing Cheryl Durose, is a welcome change.

Naked’s CEO Justin Davis-Rice singled out the incoming executive’s M&A expertise in a press release detailing the appointment.

Much of Mark’s work has involved guiding high-growth companies, which will be instrumental for the rapid acceleration of our e-commerce business and digital transformation. His M&A expertise will add significant value as we continue to pursue accretive acquisitions of high growth and cash flow positive businesses and invest in next-generation technology.

For investors looking for a lifeline, the M&A bit is most interesting. Since the company finally has some cash, it will be looking to acquire businesses that could support its new e-commerce strategy.

Management is in the box seat after a while, but there is still limited headspace available to maneuver. This is an intimate apparel company that saw sales decline 8.4% during a year when most of the world was stuck at home with little to do.

Hence, a turnaround is not a sure thing.

Quit While You’re Ahead

If you made a decent amount of money from trading NAKD stock, then kudos to you.

But as move further along the year, the company has to start building momentum if it wants to take on the likes of Amazon (NASDAQ:AMZN), L’Oréal (OTCMKTS:LRLCY), and Victoria’s Secret.

For that, it needs to pursue M&A activity aggressively while managing its finances.

It has the tools in place after an astounding year. But if it continues to be all sizzle and no steak, expect NAKD stock to keep plunging.

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

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.


Article printed from InvestorPlace Media, https://investorplace.com/2021/05/nakd-stock-a-day-traders-dream-and-value-investors-nightmare/.

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