Take a deep breath, Pier 1 (NYSE:PIR) investors -- the company's tough times don't seem finished yet. In early October, the company announced that it was curtailing its dividend in order to conserve cash. This followed news that the CEO would retire in the next few months. Then analysts at Morgan Keegan downgraded the company to an "underperform" rating, because of lower expected earnings for the firm. And last month, Standard & Poor's Equity Research analysts cut the firm's rating from "hold" to "sell." Ouch!
If you relied only on the traditional financial news outlets for information, the picture would indeed be bleak. I found few positive notes out there, even among our own Fool team:
- In January, Jason Ramage wrote "Peering into Pier 1's Future," offering both hope and caution, and comparing the firm to McDonald's (NYSE:MCD) a few years ago.
- In September, Jeremy MacNealy wrote "Rebuilding Pier 1 After the Storm," noting the firm's recent struggles to distinguish its furniture items from similar wares offered by rivals Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). He outlined Pier 1's new strategy to become a holiday-focused store.
- That same month, Ryan Fuhrman reported a "dreadful" earnings report in "Jumping Off Pier 1."
Is there no hope?
These opinions would reasonably lead one to avoid the company. But a visit to our brand-new CAPS investing service, where thousands of investors share their opinions and expectations of publicly traded companies, offers an interesting alternative view.
Last time I checked, 40 CAPS participants had rated the stock, with 23 "outperforms" opposing 17 "underperforms." Even more surprising, perhaps, is that among our most accurate "All-Star" participants, the outperform-to-underperform ratio was 10 to 3.
What do the bulls see in this beleaguered firm? Here's a sampling of comments:
Pier 1 is a depressed furniture and lifestyle item retail store. I believe that the stock has good potential for recovery -- especially as the holiday shopping season looms ahead. -- KahunaCFA (rated No. 171 out of nearly 9,000)
Fairly speculative from an operations perspective, but the stock has been beaten down to a ridiculously low valuation. Execution has been horrible, but the sale of the credit card receivables meaningfully improves the balance sheet. While the economic environment is challenging for the company, PIR's new catalogue looks pretty good (and prior comparable sales are very easy). There's an outside chance somebody might try to buy out the company at the current valuation to put the company out of its misery. Alternatively, an impressive new CEO could cause the stock to pop. -- Gumpster (rated No. 20)
The new store design/strategy implemented by [departing CEO] Marvin Girouard should help turn this store around. Additionally, they are sitting on a building valued at $130 or so million dollars in the hottest commercial real estate market of Fort Worth, Texas, which could generate significant cash in a sale lease-back transaction. -- MBornitz12 (not yet ranked)
If you're interested, KahunaCFA's best pick has been Northfield Labs (NASDAQ:NFLD), and his worst one has been Cryptologic (NASDAQ:CRYP). Gumpster's best pick has been Panera (NASDAQ:PNRA), while his worst to date is TiVo (NASDAQ:TIVO).
Jump in!
If you love stock-picking and have good ideas (or simply want to find some), come join the CAPS community today. You can test yourself against other investors on Main Street, and see what others think about the companies you like. What are you waiting for? Sign up for the fun today.
Wal-Mart is an Inside Value recommendation; TiVo is a Stock Advisor pick; and Cryptologic is a Hidden Gems selection. Try any of our Foolish newsletters free for 30 days.
Longtime Fool contributor Selena Maranjian owns shares of McDonald's and Wal-Mart. The Fool has a disclosure policy.
