Hot Topic Gets Upgrade to Buy
"The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations," TheStreet Ratings wrote. "Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
The stock was upgraded after it hit a 52-week high on Thursday and after it reported strong fourth-quarter earnings. Hot Topic said Wednesday it earned $9 million, or 21 cents a share, a swing from a year-earlier loss of $578,000, or a penny a share.
Hot Topic shares hit a 52-week high Thursday of $10.11. The stock's 52-week low of $5.05 was set on March 21.
"We believe the current momentum in the business will continue bolstered by a recovering fashion apparel division at HT, improving accessories business and strong early reads of licensed merchandise from Hunger Games," Piper Jaffray analysts wrote in a report Thursday.
Hot Topic has an estimated price-to-earnings ratio for next year of 21.53 times; the average for apparel retailers is 15.48. For comparison, both Express(EXPR) and Aeropostale(ARO) have lower forward P/Es of 11.84 and 13.43, respectively.
Four of the seven analysts who cover Hot Topic rated it buy. Two analysts gave the stock a hold rating and one rated it sell.