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Actionable news in RAVE: RAVE RESTAURANT GROUP Inc,

RAVE Oversold As Q1 Fears Overblown And Short Sellers Rule

RAVE Q1 same store sales fears miss the context completely - see four factors below.

RAVE's stock decline driven by short sellers as short interest nears record levels.

Stock decline may increase pressure on RAVE mgmt for Pie Five IPO.

RAVE Restaurant Group's (NASDAQ: RAVE) stock fell another 25% in the last two trading sessions after the company reported quarterly results that included a 162% increase in Pie Five system sales, a 25% increase in Pie Five restaurants open since the end of the last quarter with a record 14 new restaurant openings, a 1.5% gain in Pie Five's same store sales and a small contraction from the mature Pizza Inn business.

After Thursday morning's earnings report a very negative narrative developed around the same store sales figure, largely due to many commentators taking the lower than prior quarter's 1.5% gain and management's comments that the current quarter to date is showing "slightly negative" same store sales as an indicator that consumer enthusiasm for the concept or Pie Five itself may be waning.

We do not believe that is accurate for several reasons discussed below. Additionally, we think the concerns were overblown due to RAVE's falling stock price (as commentators were looking for a reason for such a huge sell off) and our review of last week's trading suggests a very sophisticated and well executed effort using multiple ECNs to move RAVE's stock price lower following the release of the quarterly report on Thursday morning.

While we cannot know for certain until the next short interest report is released on November 24, we believe that this is evidence of a more aggressive effort by short sellers to take the stock lower and we expect that the next report will show the highest short interest in RAVE history. The stock is now down over 63% from the highs reached in March...