What: Shares of Tuesday Morning Corporation (NASDAQ:TUES) rose as much as 11% early Tuesday, then settled to trade up around 9.5% as of 1 p.m. after an encouraging analyst upgrade.
So what: Keep in mind Tuesday Morning Corp. stock plummeted 36% last Friday, after the discount retailer revealed weaker-than-expected fiscal-fourth-quarter 2015 results. Quarterly revenue climbed 0.2% year over year to $213 million, which translated to a loss of $0.10 per diluted share. Analysts, on average, were anticipating a loss of only $0.02 per share.
But according to Stifel analyst Taylor LaBarr today, Tuesday Morning's subsequent 36% drop was likely an overreaction to what the market views as a "broken turnaround story," and insisted the company's turnaround appears to remain intact for investors with a long-term time frame. With the caveat that fiscal 2016 should be a "peak investment year" for the company with free cash flow starting in fiscal 2017, LaBarr upgraded Tuesday Morning stock from "hold" to "buy" and assigned a per-share price target of $9.
Now what: While I'll admit Tuesday Morning's massive drop last week was almost certainly overblown, I also can't blame investors for their pessimism given the combination of Tuesday Morning's ongoing losses and recent management turnover. Remember, the company only just appointed a new chief operating officer in April, and announced the resignation of its chief financial officer -- who is pursuing "other professional opportunities" -- less than two months ago. Until Tuesday morning shows a more tangible demonstration of its ability to maintain consistent profits over the long term, I'm content watching its progress from the sidelines for now.
Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.