After last year, we can all agree that pandemics suck. The world is still trying to contain the Covid-19 virus, which caused a big global ruckus. It has been a human tragedy for sure, but there are some good investment concepts that came out of it. 2020 was the dawn of the SPAC. Tattooed Chef (NASDAQ:TTCF) stock is one of them, and today we examine its upcoming opportunities.
TTCF fell 3.5% yesterday on a flattish day on Wall Street. The macroeconomic sentiment flipped bearish last week without any particular triggers. The rhetoric is now more cautious than in prior weeks. Meanwhile, nothing has changed in the actual price action from the indices perspective.
The S&P 500 and the Nasdaq, for example, are still within 2% of all-time highs. Therefore, the more logical assumption is that the bulls are still in charge. Within that context, TTCF stock should find footing soon based on its own chart.
SPACs Get the Zoomies
It being a SPAC means that it moves fast. These stocks fall in and out of favor violently and often. Case in point, since August 2020, it rallied twice 100% and another two times more than 50%. It has also given back at least 30% each time. TTCF is currently in the process of correcting from the early September high near $25 per share.
So far it has fallen 21% lower and the bulls are looking for a bottom. This is not something that’s easy to do with momentum stocks. On the way down they seem like bottomless pits. But if we look at the prior price action, there is actual support near $19 per share. Therefore, we can assume that as it will find buyers near there again.
The bulk of the drop came on a negative reaction to their earnings. As always, investors on Wall Street overreacted in both directions. First they crashed it 20% on the headline. Then, they rallied 60% in a matter of days. Somewhere in the middle should lie the truth, and that’s exactly where we are right now.
Investors should not seek perfect entry points. In the long term this management team is likely to succeed. They just need time to prove to Wall Street that they will deliver on their promises. The financial metrics are still too new to use as pro or con arguments for the stock. The trailing 12 months revenue line is still tiny but showing promise. They still lose money but that’s not the point at this stage of their operation.
TTCF Stock Is Not Expensive
Statistically there is some good news in the fact that the price-to-sales is only 12. If that’s correct, then the investors in TTCF stock are somewhat realistic. As long as the company can maintain a healthy growth rate, the stock can earn more attractive ratios. According to Yahoo Finance, there are too few analysts who cover it. Maybe it’s just a matter of exposure, and eventually more investors will find it.
The current average price target from the four experts is $22.50 per share. It’s hard to draw any conclusions from their opinions, so let’s just use logic. The global trend is for healthier living with more responsible consumption habits. Moreover, the pandemic created e-tailing habits especially in the food sector. TTCF fits the bill on both fronts.
According to their website, they maintain B2B and B2C segments. I have tried their products and I’ve enjoyed them tremendously. They will be part of my repertoire going forward. Whether I buy them online or in the stores doesn’t matter. They capture the revenue one way or another.
The point of a growing company is to impress investors with performance. In TTCF stock case “time” is the ingredient that’s missing – pun intended. There will be bumps along the way as is evident from the last few months. The important part is to avoid the obvious mistakes.
Primary Objective Is to Avoid Easy Mistakes
Chasing stocks after a runaway rally like in early September is wrong. Conversely, capitulating after a 20% correction is also sub-optimal. Taking full size positions now is another mistake to avoid. Long term, TTCF is almost exactly in the middle of the range since last June. This by definition is a reasonable starter position especially for long term goals.
Active traders could possibly find more surgical entry points. But in the long run it’s not going to matter much. TTCF stock on lower time frames shows absolutely no moderation.
What the overall markets do will impact it here. Because regardless of how good this stock is it does not trade in a vacuum. There’s no way to TTCF will rally if the stock markets are correcting. Sentiment has soured on Wall Street, but I still like the odds of having new all-time highs. We are closer to those than a major correction in the next few months.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.