Hour Loop is a US based e-commerce online retailer that sells merchandise on its own website in addition to Amazon.
HOUR only began life on the boards in early 2022, following a successful IPO listing on the Nasdaq through brokerage firm EF Hutton. Hour Loop initially issued 1.5 million shares at $4.00 each to initial investors.
The stock experienced a hot start to trading with HOUR rallying as high as $10.33 on the first day. Following a successful start to trading, HOUR traded sharply lower in the weeks that followed and was floating around the low $2 range by late February.
In the following 6 months, the stock has been range bound trading between $2 and $3 with the exception of a few sharp and brief rallies.
During this week Hour Loop has risen 19 ranks on the Short Squeeze leaderboard to the top spot as short interest continues to build.
This month, short interest has risen 14.87% to 15.59 million shares. This represents about 16.3% of the total float with 14.89 days to cover.
In addition to the growing level of short positions, the stock has risen more than 10% over the last month.
Institutions are likely betting on the prospects that HOUR will need to raise capital at the expense of shareholder dilution. This could push shares lower depending on the magnitude of the raise.
However, this event may not need to take place if management’s expectations come to fruition.
At the firm’s most recent financial result, Hour Loop told investors that they had grown revenues by 27.1% over the year to $14.8 million from $11.6 million. The sales figure also increased from the $12.4 million generated in the prior quarter.
Gross profits rose by 22.9% over the year to $8.35 million but the group’s net profits faded from $1.07 in 2021 to a net loss of -$400K in 2022.
The primary variance in the result over the year was driven by a 53% increase in total operating expenses which outpaced sales growth.
Hour Loops CEO Sam Lai blamed the challenging macroeconomic environment, FBA fees and strong competition for earnings swing to losses when compared to the prior.
Despite the headwinds being faced by the company, Lai highlighted to investors that “despite these challenges, we are frontloading our investments for the year while projecting to show profitability and maintain double digit revenue growth for the full 2022 year.
The firm’s revenues are usually skewed heavily to the fourth quarter as it is aided by the holiday trading period.
HOUR ended the quarter with $2.3 million in cash on the balance sheet and $14.6 million in inventory.
The company reiterated guidance to investors during the result expecting to generate revenue between $81 to $90 million over 2022, representing 30-45% growth over the prior year.
Analyst Ben Piggot from EF Hutton believes the firm’s front-loaded inventory investments should pay dividends in the second half of the year as seasonality comes into HOUR’s favour.
The firm trimmed their target price from $7 to $5 to reflect lower revenue expectations from the tougher operating environment but remains ‘buy’ rated on the stock.
This story originally appeared on Fintel.
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