It has been good to get outside to fire up the old Weber grill as the weather starts to turn and we have an extra hour of daylight. When I say "old," I am referring to the fact that we've had the same Weber for the past 20 years. Any other grills we've had have been throwaways after no more than five years, so I am definitely a believer in the quality of a Weber.
Nonetheless, I was not a big believer in the stock of Weber Inc. (WEBR) when it went public last August at $14, closed the first day of trading at $16.50, then hit the $20 level within days of its initial public offering. It just seemed a bit pricey, and I am typically wary of the IPO effect -- stocks get bid up too quickly, then come back to earth when the growth crowd gets disappointed and moves on or the company is unable to deliver on expectations.
However, I was comfortable picking up shares in the $12 range in mid-December. That has not been a great trade so far, with shares down about 11%, but this is intended to be a long-term hold of a solid brand name that trades at about 20x next year's consensus estimates.
But Weber is a wild ride. Its shares were up 7% on Tuesday, and there is little doubt the negative view held by the bears is influencing the stock. Short interest has risen to 39.5% of the float. Just over a week ago, it stood at 32.3%. As I wrote then, part of my position had been loaned out via a securities lending program. The lending rate, which at that time had risen to 21%, continued to 23%, then dropped to 21.5%. Two days ago, that Weber position was returned to my account.
I did not take a position in Weber because of the potential of a short squeeze, though it is clear there is the possibility of one. Of course, those shorting the name believe it is still overvalued, and one way Weber could counter that sentiment is to deliver strong results. However, its second-quarter earnings are not expected to be reported until mid-May. The current consensus, which includes eight analysts, is calling for revenue of $668 million and earnings per share of 21 cents, with a high/low range of 30 cents and 14 cents.
Early in its publicly traded career, Weber has not been great on delivering results up to what is expected; it has missed the consensus in two of the three quarters in which it has reported since going public.