Friday, March 28, 2008

Choo Choo

This is probably premature, but I'm gonna toot my own horn a bit. To say I'm chipper right now would be an understatement.

Wet Seal finished today in the #25 spot on the Nasdaq, posting a gain of 11.5%, it had peaked earlier in the day with a 13.9% gain, on heavy volume I might add (~3.5MM shares vs 1.5MM avg). There's no doubt in my mind that part of the run-up was a continuation of yesterday's move based on the earnings release and conference call. But, in addition, there were two Buy reiterations with one firm increasing their price target.

Roth Capital reiterates Buy, and raises their target to $5. When I started buying in heavily, I estimated very conservatively that we were looking at roughly $4 in value. I hope these other folks are right, but I will say now that I will unload a portion of my shares if we do reach $4.

Brean Murray also reiterates their Buy rating. They hold their target at $4.50 and lowered their 2008 estimates to 0.32 from 0.35. They feel that the management's new style of reporting results where Wet Seal and Arden B results are shown independently helps increase value. The firm makes a comment about how the increased visibility is able to show just how strong the Wet Seal unit is, and how badly Arden B has been cramping the company. They say that based on a sum-of-parts analysis, Wet Seal has 'material value' that is not reflected in the current stock price, and therefore they continue to be aggressive buyers of the stock.

I might as well add Credit Suisse's take on this. From a report they released yesterday...

Investment Thesis: We maintain our Outperform rating. Backing out $1.00 in cash, $0.40 in NOLs and excluding a $0.15 loss for Arden B next year, the core Wet Seal business is trading at 3.3x our F08E (at current price of $3). We believe there is further upside as management’s focus on cost cutting initiatives, inventory management and other low hanging fruit continue to pay off.

All I can say right now is... GO SEAL GO!!! What a nice way to end this week!

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