January 25, 2006
SpeculatingStocks.com Stock Pick: Hot Topic, Inc. (HOTT)
Stock Price: $13.61 (short-term strong Buy)
"Hot Topic is well known as the "Band and Goth" retailer. The company focuses on teens looking to rebel against the denim craze."
Industry: Apparel Clothing
Price to Earnings: 21.43
Price to Sales: .865
Market Cap: $610.78 million
HOTT News Stories
January 25, 2006: Hot Topic's Van Cleave of Torrid division resigns
January 9, 2006: Robin Elledge Joins Hot Topic as Senior Vice President...
January 4, 2006: Hot Topic December sales disappoint, cuts outlook
January 4, 2006: Hot Topic, Inc. Reports December Comp Store Sales Down 6.2 Percent...
November 16, 2005: Hot Topic 3Q Earnings Plunge to $5.9M
July 28, 2005: Cold Quarter for Hot Topic
June 2, 2005: Retailers Kept Warm in May
April 7, 2005: Early Stocks in Motion
March 2, 2005: Retail Reports Start Strong
February 3, 2005: Uneven January for Retail
Bottomline: Hot Topic sales rose 14% last January compared to the year before. One month later same-store sales rose unexpectedly 0.2% with expectations of a 2% decline. Another month later, March 2005, same-store sales rose 5.3%. Overall sales rose 21% for that month! That is three months of improvement. We are in the midst of that same successful period and we expect HOTT to surprise again, this time catching everyone off guard.
In the current time period last year, HOTT gained 34.7%. HOTT shares reached a high of $23.49. Three months of strong, and surprising sales results drove this action.
Right now... Everyone is expecting HOTT to continue to report bad news. Everyone is hating on HOTT especially the shorts. Hot Topic will surprise and have another strong spring. Investors are not looking at the history of this stock, in fact, investors are blurred by the Denim craze!
A little history... HOTT had its IPO in late September of 1996. HOTT has made a strong move in seven of the last eight years during this time of the year. The only time it did not have the kind of expected move was in early 2004 when HOTT hit an all-time high of $32.30 and corrected down.
Technical issues... HOTT had major support at $14.00 and lost this battle, but is now recovering strongly from its support right below $14.00. This support level below $14.00 has proven to hold up in the past.
A guy named Scott W. Hedrick a "Director" at Hot Topic reported his required insider purchase of HOTT. Late last year, Insider Hedrick purchased $288,400 worth of HOTT shares at $14.34 and $14.50. Mr. Hedrick is also a "Director" of Office Depot, Inc.
The shorts are blurred and becoming greedy at this level. There is now a short position of over 11% acting on the 43.6 million share HOTT float. Best of all, these short players are expressing their opinion all over the net and showing their nervousness. People who short can only gain 100%, but they can lose over 100%. Shorting is a risky activity, any sign of a move higher will have the shorts showing more emotion and eventually forced to cover and drive HOTT higher.
SpeculatingStocks.com Target Price: We expect HOTT to reach $18.00 within the next one to three months.