Please ensure Javascript is enabled for purposes of website accessibility

Why Fox Factory Holding Surged 41% Last Month

By Jeremy Bowman – Jun 8, 2020 at 4:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The mountain-bike maker jumped as its products suddenly came into vogue.

What happened

Shares of Fox Factory Holding (FOXF 5.04%) climbed last month as the company delivered a better-than-expected first-quarter earnings report and benefited from the perception that its outdoor recreation products, which include mountain bikes, ATVs, and snowmobiles, would see sales gains due to social-distancing protocols.

According to data from S&P Global Market Intelligence, the stock finished the month up 41%. As the chart below shows, the stock rose fairly steadily over the course of the month.

^SPX Chart

^SPX data by YCharts

So what

Despite challenges related to the COVID-19 pandemic, Fox Factory still reported that sales increased 14% in the first quarter to $184.4 million, which beat estimates of $179.6 million.  Profits dipped slightly as the company absorbed costs from factory closings in the second half of March. Gross margin fell from 31.6% to 30.7%, and adjusted earnings were $0.52 per share, down from $0.55 per share a year ago, and missing expectations for $0.56 per share.

A rider on a Fox Factory mountain bike

Image source: Fox Factory.

Fox Factory stock posted modest gains in the days after the earnings report, but shares really seemed to take off after reports emerged that bicycles were selling out at stores as consumers looked to them for socially distant recreation and commuting. Fox Factory seems likely to keep benefiting from that trend.

In fact, the manufacturer got an upgrade on May 29 from Bank of America analyst Rafe Jadrosich, who lifted his rating from neutral to buy, and said that the company should benefit from a shift away from more traditional entertainment to "solitary leisure experiences." 

Now what

Fox Factory stock has continued to rise through June as the broader market has trended upward on hopes for a rapid recovery. The stock is up 21% through June 8 even though there has been no company-specific news. Management pulled its guidance for the year back in April due to the disruption from COVID-19, but investors seem to expect the company to be a winner, propelled forward by the combination of an economic rebound and the ongoing use of social-distancing practices. 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Fox Factory Holding. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fox Factory Holding Corp Stock Quote
Fox Factory Holding Corp
$84.04 (5.04%) $4.03
Bank of America Corporation Stock Quote
Bank of America Corporation
$31.07 (1.64%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.