As far as inexpensive, risky bets go, Naked Brand Group (NASDAQ:NAKD) stock remains one for longer-term investors to consider. The company is attempting to pivot its brick-and-mortar-focused lingerie and swimwear business into a successful e-commerce enterprise.
Naked has financed that transition through shares that it issued in late January on the back of meme stock mania that had quadrupled its share price overnight.
Many other InvestorPlace columnists have contended that Naked Brand’s time is up and that although the firm is interesting, it will ultimately founder. Time will tell, and I have nothing more than an opinion on the issue, but there are legitimate reasons for investors to to be bullish on NAKD stock moving forward.
Naked May Be Delisted
Back on April 29, Naked Brands Group was notified that its minimum bid price was below $1.00 for a period of 30 consecutive days. That meant that it was in violation of Nasdaq’s minimum bid requirements.
I believe that too much is being made of this situation. In fact, the company has been dealing with this exact issue since early 2020. A cursory glance at Naked Group Brand’s 2020 press releases indicates that the company mentioned Nasdaq compliance issues in these releases at least five separate times.
The company has until Oct. 25 to regain compliance with the rule. However, Nasdaq notes that “it may be eligible for additional time.” In the worst-case scenario, Naked Brands will likely need to “provide written notice of its intention to cure the deficiency…, including by effecting a reverse stock split, if necessary,” Nasdaq reported.
A reverse split would increase selling pressure on NAKD stock and would probably be the worst outcome. But Naked Brands should be able to avoid that fate.
The Company Is Keeping Its Word
Naked Brands Group garnered attention when its stock quadrupled in late January. The rally was largely fueled by Naked’s elevation to meme stock status after the company announced on Jan. 21 that it would divest its brick-and-mortar operations and focus on its e-commerce business.
Spurred by that news, Redditors charged into the shares. Meanwhile, Naked Brand’s management issued NAKD stock, making a bunch of money for the company.
On April 30, the company sold its Bendon brick-and-mortar operations, leaving it free to focus on e-commerce.
Naked Brands has largely completed its pivot towards e-commerce and away from its brick-and-mortar operations. But investors can’t expect the company to instantaneously generate massive e-commerce growth.
Given the time that it will take the e-commerce business to prosper, I’m not surprised that NAKD stock is trading sideways for now. But the company has a significant amount of cash and no debt, and it’s considering making another acquisition.
Redditors Out, Long-Term Holders In
I’ll be the first to admit that NAKD stock is a speculative name. However, this is a reasonable time to establish a bullish position in the stock.
Short interest in NAKD stock currently sits near 6.6%, which is not exceptionally high. That indicates that the shares are more likely to be boosted by increased optimism about Naked’s longer-term prospects than by a short squeeze.
The e-commerce space is competitive, and it will not be easy for Naked Brands to carve out a niche against its entrenched competition. However, let’s imagine that it announces next month that it has acquired a new, complimentary brand in the sector. No one will care about how the company got to where it is now, but only about where it’s going.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
