It’s been an incredible month for shareholders in beauty behemoth Revlon (NYSE:REV). As of June 10, investors could have picked up shares of REV stock for around $4 a pop. On June 13 (the following Monday), shares of Revlon dropped to nearly $1 per share. From that level, we’ve seen an incredible recovery, with investors now pricing this stock at more than $7 per share today.
So, what gives? After all, this whole ordeal started when Revlon announced the company was filing for bankruptcy.
Well, as fellow InvestorPlace Financial News Writer Samuel O’Brient pointed out in a recent piece, buyout rumors have swirled, with some suggesting that Revlon could be a nice tuck-in acquisition for a larger beauty-related company. Another InvestorPlace report from Joel Baglole suggests REV stock has also become a top short squeeze candidate for retail investors.
Thus, there are two real catalysts driving Revlon stock right now. Both have nothing to do with the company’s fundamentals, which are clearly impaired. However, these catalysts have had the effect of taking REV stock on a trip from $4 to $1, and then a 600% increase from the bottom.
Let’s dive into where investors should go from here.
Is REV Stock Worth a Buy on These Catalysts?
I don’t think investors should touch Revlon at these levels.
Sure, this stock could continue rallying from here. Momentum does its thing, and anything’s possible. Indeed, we’ve seen what’s happened with squeezes in the past.
However, when there’s ultimately no fundamentals supporting a move like this, the downside with such a trade is often as violent as the upside. This could get messy. Fast.
Other high-profile bankruptcy situations have certainly provided trading opportunities, much like Revlon. That said, history speaks for itself in these cases. This stock is simply far too risky for my liking, and for those with more conservative risk profiles. Accordingly, I’m of the opinion that Revlon is a stock to steer clear of right now.
On the date of publication, Chris MacDonald 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.