If Hollywood has taught us anything, it's that the average guy has a shot at beating the pros. Who can forget when "Wild Thing" Rick Vaughn struck out Clue Heywood with three straight heaters in Major League? Classic.
Today, we've got a matchup worthy of a movie script, as the Fool community squares off against Roth Capital Partners over Hot Topic (NASDAQ:HOTT). Roth Capital isn't a CAPS player, but its picks are being tracked on Motley Fool CAPS. It's bullish on Hot Topic, but the community has given it the lowest possible rating in CAPS. Roth is the highest rated Wall Street entity being tracked in CAPS, so our community of Main Streeters has its hands full.
Let's go to the tale of the tape. Roth clearly has the experience, but the community has a numbers advantage.
Roth Capital Partners: Bull
- Leading investment bank for emerging-growth companies
- Raised more than $8.7 billion for small companies over the past 10 years
- Ranked No. 6 in CAPS with 71% accuracy
Fool Community: Bear
- More than 9,000 CAPS players strong
- Has not raised any money in the financial markets (. yet)
Looking at the community pitches in CAPS, there are several comments about Hot Topic being a fad. Teenage fashion is notoriously fickle, which poses a risk for many retailers. As TMFLucky11 said:
"Hot Topic's fallen out of favor with youthful consumers, and the change in trends will continue to put a significant dent in the company's bottom line."
Well put, TMFLucky11, who is clearly onto something because September comps dropped 7.3% and the company lowered guidance, sending shares downward.
Roth, however, is sticking to its original bull thesis. According to a research report from Oct. 5, Roth lists several catalysts for a turnaround, including positive trends for Torrid stores, the plus-sized women's concept.
Taking sides
Is Hot Topic a fad, as CAPS players claim? Or will Roth's turnaround thesis prove true, ruining a Hollywood ending? We'll have to check back in a year or two to find out. Interestingly, Roth Capital and the community also disagree on bebe (NASDAQ:BEBE) and Jos. A Bank (NASDAQ:JOSB), but both give Chico's (NASDAQ:CHS) a big thumbs up.
After reading some thoughtful analysis by Stephen Simpson, I have to side with the community on Hot Topic. Stephen cited slow traffic and unimpressive comps as reasons to avoid this one, and I tend to agree. There are better options in fashionable retail.
I just got into the game by giving Hot Topic an underperfom rating. Now it's your turn. Will you side with Wall Street or Main Street?
For related Foolishness:
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bebe is a Stock Advisor recommendation.
Fool sector head Joey Khattab has watched Major League many, many times. He does not own any shares of the companies mentioned. The Motley Fool has a disclosure policy.
