Screening Penny Stocks for the next Yahoo or the next OceanFreight is never a simple task. With all the different comparisons to make, it can become a very tedious task, sometimes endless. And then you find it;
A company that is:
- Ranked 5th in its industry of 122 for Long-term Growth over the next 5 years.
- Worldwide footprint in their Industry with Quarterly Revenue Growth
- Market Capitalization of over $50 Million
- Insider Purchasing of their Stock and no Insider Sales
- History of trading at levels well over the $10 range
That company is American Apparel, Inc. (NYSE AMEX: APP)
When we screened APP, trading at $0.53, we were astonished. APP is 53 cents? Walk up to any American on the street, and they will know about this company.
APP traded as high as $15.60 just a couple years ago before the recession hit. Recently, the company hit an all-time low of $0.52. A bounce in APP has already started as indicated by a recent MACD cross and apparent failure to break through the low it created at the end of November as it starts to curl upwards and head north.
Some of its recent changes include a new CEO, some business changes, and more store openings along with the current 285 stores already operating worldwide! See below for our in-depth analysis and all the reasons for American Apparel`s recent price action.
Begin your Research at: http://americanapparel.net/
COMPANY SNAPSHOT: Thursday, Pre-Open
American Apparel, Inc. (AMEX: AAP)
- AAP is down 67.84% for the last 12 months
- AAP is down 40.86% for the last 3 months
- AAP is down 28.57% for the last month
- Avg. Daily Vol. (3M): 296,408
- Yesterday Vol: 253,600
Yes, you read that correctly….
APP IS TRADING AT ONLY $0.53!
We`re talking about a Multi-National company named the “2008 Retailer of the Year” with over 285 locations worldwide from the US to China and employing over 10,000 employees trading in mere PENNIES! Needless to say, when we saw this, we were absolutely floored! How can this be and how big of an opportunity could this be at such a cheap price?
Now if you have not heard of APP you simply need to get out more and throw those Wrangler jeans in the trash because this is 2011 and APP is one of the biggest and hottest clothing brands in the world today.
How big Well with over 285 stores in 20 different countries and in almost every state in the US with a very aggressive and “attention-grabbing” advertising campaign, it`s pretty hard to miss. As you can see on the left, APP knows how to get the consumer`s attention.
In fact, you`ll find it hard to find any female under the age of 30 wearing leggings without an APP tag.
APP is a vertically integrated manufacturer, distributor and retailer, based in downtown Los Angeles, California. APP opened its first retail location in 2003 and became the “Inc. 500” award recipient two years in a row as one of fastest-growing private companies in U.S in 2005 and 2006.
Within APP `s business model, knitting, dyeing, cutting, sewing, photography, marketing, distribution and design all happen in the company`s facilities in Los Angeles. APP operates the largest garment factory in the United States, at a time when most apparel production has moved offshore. With recently opened stores in China, APP is now selling Made in USA clothing in the largest consumer market in the world.
APP came to immediate prominence by targeting teens and young adult “hipsters” with clean, well-made, and sometimes provocative clothing. APP retail locations cost little setup and generally target urban retail locations with less expensive property values for acquisition allowing the company to expand faster than any retailer in history.
APP`s line of clean and simple t-shirts, hoodies, and undergarments have become necessary garments for both men and woman. Today, you can find an APP location in almost every modern major city in the world.
It`s not secret on the Street that shares of APP have been sinking to new lows this year. What`s important for traders to notice is APP`s history of Breakout Rallies after it has consolidated at lows.
As you can see from the chart below, each breakout rally was preceded by periods of consolidation at its lows. With APP now consolidating at its ALL-TIME LOW, it could be only a matter of time before we a new reversal.
Traders will also note just how completely “Oversold” APP is by using our RSI indicator. Looking at RSI, it looks to be in the midst of a reversal as buying momentum has returned. The MACD is the most telling indicator with the line and signal about to cross into BULLISH DIVERGENCE.
From a completely technical perspective, a Trend Reversal looks IMMINENT!
So why did APP Decline to begin with?
Call it growing pains, especially for a company that has grown so fast, a string of late filings, lawsuits, higher cotton prices, the loss of 1500 illegal workers, slowing down operations, and the recession may have hurt investor confidence in this fleeting brand. Most of all, in 2010 revenues declined, and total debts rose to $120 million, and the company was in danger of defaulting on an $80-million loan from British-based Lion Capital.
CEO Dov Charney commented, “We’re in the early stage of our development” having only been retailing since 2003. “There’s a lot of maturing that’s going to take place in terms of the customers understanding of who we are and our own ability to operate in a fully efficient manner.”
That, with substantial short interest and some funds pulling out their holdings of the company, and you can see why 2010 was certainly a difficult year for APP. Yet many believe the “hipster” trend may be on the wane which caused a slight decrease in sales for 2010. But, none of this has stopped APP from being one of the most innovative brands today and they have a solution for this.
So what could cause a New Breakout Rally, all technicals aside?
Simply put, REVENUES. With a recent slew of news last week in which APP reported Improved Monthly Retail Performance and Increased 4th Qtr. Sales, APP could be primed to make an Epic Comeback here. APP announced this week that its total net sales in the fourth quarter are up 7% on a quarter-to-quarter basis through Nov. 30. Comparable sales increased 6%, which included a 5% increase in sales at retail stores and a 16% jump in online sales, according to the Los Angeles-based clothier. Wholesale net sales were flat, quarter-to-quarter.
“We are pleased with the momentum that is building in our core businesses,” said Dov Charney, chairman and CEO. “Our retail channels, both in store and online, are seeing sales growth, indicating a revitalized connection to our customer. We are excited about this trend. We feel it is long-lasting, and it is one we can meaningfully build upon.” APP said comparable sales increased 10% in November, with a 7% rise in retail store sales and a 32% increase in online sales. In October, comparable sales jumped 4%, including a 3% rise from retail stores and a 6% rise in online sales.
Chairman and CEO Charney also said: “Other positive signs include improved efficiency at our manufacturing facilities, stabilization of world cotton prices and improved profitability at our average retail store.” APP, which reports annual North American ad specialty sales of $89 million, ranks as the 14th-largest supplier in the industry.
And let’s not forget that there are still MANY big institutions heavily vested in APP.
While revenues may have dropped in 2010, it was slight and it’s hard to write off any company that still books over a HALF-BILLION in sales revenue per year. Much of this revenue has come from APP`s strong internet presence which recently expanded by partnering up with eBay (NASDAQ: EBAY) earlier this year.
Yet APP is still expanding to high value locations having recently announced the opening of a new store in Galaries Lafayette in Lille, France, one of the most renowned international department stores.
So how is APP combating those who believe the “hipster” fad they are known for is waning? They`re agreeing!
As Chairman, CEO Dov Charney recently claimed “hipster is over”, the company plans to venture into a more “prep” and accessible look putting them in the same arena as JCrew, Abercrombie, and American Eagle while still maintaining their cutting edge designs and aggressive marketing they are known for. APP already has the retail locations, the name-value, and the infrastructure to make this happen.
Bottom Line: In the past 12 months, AAP has executed on their strategic plan, improved sales and financial performance and enhanced their financial flexibility. There is just so much upside here on APP at this bottomed level that it’s simply hard to ignore the mere $0.53 price tag!
We`re calling it here folks! The penny stock of American Apparel (APP) is on alert and we’re shooting for another big come back from this strong American Brand.Share