Weber Stock Looks Overcooked After Apparent Short Squeeze
With hardly any warning, Weber (NASDAQ:WEBR) stock garnered attention among traders recently and catapulted higher. Is this due to company-specific news, such as a terrific earnings report? Not at all, as Weber has actually swung from a profit to a net earnings loss. More likely, this is all just part of the current meme stock craze.
Therefore, it’s wise to refrain from investing in Weber now.
It’s tempting to get caught up in meme stock mania. You may have read in the Wall Street Journal and Financial Times that a college student made around $110 million trading Bed Bath & Beyond (NASDAQ:BBBY) stock.
However, Bed Bath & Beyond shares lost over half of their value on Aug. 18 and 19. So, the meme stock trade doesn’t always have a happy ending.
If you’re considering jumping into the meme trade and grabbing some Weber shares, just think about the volatility risk. Moreover, be sure to investigate Weber’s fundamentals before taking a position. Just a little bit of due diligence could save you from a whole lot of financial problems.
What’s Happening with WEBR Stock?
As BBBY stock gained hundreds of percentage points in a matter of weeks, traders eagerly sought out the next big meme stock. The next thing you know, financial market influencer Will Meade is pointing out that WEBR stock had a whopping 67% short interest.
Meanwhile, traders at subreddit r/WallStreetBets were buzzing about Weber, asking where the short sellers will get the shares to cover their positions. Thus, the makings of a massive short squeeze were in effect.
The result was a condensed version of what happened to BBBY stock. From Aug. 17 through Aug. 19, WEBR stock flew from $8 to $11, but then retraced back to $8.85.
The last thing you probably want to do is get caught on the wrong side of this trade, as the volatility risk is highly elevated now. At the very least, we should take a closer look at Weber’s fundamentals before making any hasty trading decisions.
Weber Swung to a Net Loss and Suspended Its Dividend
The heading of this section pretty much says it all. Weber swung from a $17.8 million net profit in the year-earlier quarter, to a $7.5 million net earnings loss in 2022’s second quarter. This net loss translates to 41 cents per share, which is much worse than the net loss of 7 cents per share that analysts had anticipated.
Also, Weber’s revenue declined from $668.9 million in the year-earlier quarter, to $527.9 million in Q2 2022. In case that’s not enough to scare you away, Weber expressed plans to suspend its quarterly cash dividend. Furthermore, the company is cutting its workforce.
Dividend suspensions and workforce reductions aren’t typically signs of a thriving business. CEO Alan Matula can boast that Weber is “the #1 brand and the global category leader in outdoor cooking,” but if you invest in the company now, you’re only likely to get burned.
What You Can Do Now
As an investment, WEBR stock isn’t justifiable because Weber isn’t succeeding as a business. Some amateur traders might buy the stock anyway, and that’s unfortunate.
Hopefully, they won’t lose too much money before they learn a valuable lesson about trading volatile meme stocks. It’s more sensible to learn about a company’s fundamentals and then make an informed decision.
When it comes to Weber, prospective investors can conduct their due diligence on the company but then choose to stay out of the trade altogether.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.