It is no secret that since the pandemic, the service industry has taken a major hit. With lockdowns all over the world, businesses like Regis Corp (NYSE: RGS) slumped considerably. Yet, RGS has remained a multi-billion dollar company with a solidified role in the beauty industry. RGS stock has been bleeding out since May but saw a 21% spike on September 28th which continued into early market on the 29th. As investors decide whether RGS will become one of the successful pandemic rebound stocks, RGS continues to make gains in its industry, and remains one of the trending stocks on social media.
Today, Regis is a leader in beauty salons and cosmetology education. The company owns, franchises, or holds ownership interests in more than 6,000 locations. But the company’s fourth-quarter report showed a net loss of $26.5 million. This loss is largely due to government-ordered closures across the country. Pre-Covid 19, RGS traded at $17 a share but has since plummeted to below $4.
Felipe Athayde, CEO of RGS, has stated that “While we are still feeling the effects of the pandemic, Regis is well-positioned heading into fiscal year 2022 due to our achievements during a time of unprecedented challenges in fiscal year 2021.” The CEO’s hopeful outlook is likely a reflection of diminishing Covid cases, increasing rates of vaccination, and the slowly recovering hair-care service market.
Through recently published financial reports, nominal sales continue to improve. Q4 2021 System-Wide Same-Store Sales are up by 4.2% compared to the same period last year. The year-over-year improvement in adjusted net loss is attributed to the lessening of government-mandated lockdowns. This improvement however was jeopardized by an increase in losses due to lower proceeds from salons.
On a larger scale, the U.S. Commerce Department just published the Personal Income and Outlays report for August 2021. The data shows a recovery in August in Personal consumption expenditures (PCE) at 0.8% increase in comparison to -0.1% in July. This data is important to consider, especially over the long term, in relation to an industry like the beauty industry. It measures how much people are spending versus saving. Therefore, the higher the percentage, the more companies like RGS benefit.
RGS recently announced the commencement of a transformational phase for the company as it partners with leading distributors to streamline the distribution of its products. In this way, RGS will be able to offer its private label products and new innovations to franchised customers.
Regis is also making changes in its leadership to mirror this change in strategy, having recently announced that Lockie Andrews would be joining their board of directors. The Head of eCommerce and Digital Operations at Party City (NYSE:PRTY), her expertise in the field of web, mobile, app, and digital sales and operations will be a major asset for the company. Andrews has already hinted at her future plans for RGS saying she is looking forward to her new role in unlocking “the immense capabilities of data analytics powered by the Opensalon® Pro platform”.
The company’s market cap is estimated at around $124.6 million with 35 million outstanding shares. Currently, 75.52% of RGS’ total shares are held by institutional investors. Its biggest shareholders include Cramer Rosenthal McGlynn LLC, BlackRock Fund Advisors, and Massachusetts Financial Services Company.
Observers have pointed out that hedge funds’ recently growing stakes in RGS are indicative of a possible shorting, which is a huge reason of why RGS is currently among the trending stocks. It appears that 21.73% of the float is shorted and as of September 15th, 6.44 million shares were sold short. Investors have pointed out that given RGS’ considerable assets its current PPS is notably undervalued and as it continues to gain traction on social media, the stock could experience a short squeeze.
@unusual_whales nice catch
Starting September at a high of $5.13, RGS has since witnessed a downward trend and is currently trading at its 52-week low of $3.48. Although the stock spiked up on September 29th it became overbought and dipped to its current support at $3.48. Accumulation mirrored the dip and its MACD had a bearish crossover on the 29th with no signs of a reversal. The RSI is currently holding at 32.44.
Should You Buy?
While RGS has suffered through the pandemic, changes in its management and business plan as well as loosening pandemic restrictions indicate a potential turn around for the stock. The company is fundamentally undervalued at the moment and could be an excellent rebound stock in the near future.
With short interest increasing and social media interest increasing, RGS could be a short squeeze candidate if its popularity continues to grow over the next few days, and it remains one of the highly trending stocks. Watching for the right entry and exit point is always necessary so investors should be careful not to be left holding the bag.
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