June 14, 2021  Michael Spencer

At the Last Futurist, we follow micro cap stocks pretty rigorously. As the U.S. is boosting local tourism this summer, I think a significant winner could be XpresSpa, ticker $XSPA.

Much maligned by the shutting down of airport traffic during the past 15 months, they nonetheless turned their Spa business into a Covid-19 testing business. In July and August, I see this stock going up a lot compared to its current depressed price of $1.61.

Undervalued and Will Join Russell Micro Cap

They are a health and wellness company, who are set to join the Russell Microcap® Index at the conclusion of the 2021 Russell indexes annual reconstitution according to a preliminary list of additions posted on June 4.

They are borderline meme stock too, with a significant short position against them. While energy and financials have got all the love, I think retail and tourism will start to pick up as the summer goes on. They made this really bizarre and unlikely move during the pandemic and turned its shuttered airport wellness business into Covid-19 testing facilities. At first I was skeptical, but my attitude has significantly changed. It’s all about the earnings, baby.

Accelerating Earnings in 2021

In mid May earnings were better than expected. Looking at the company’s 1Q21 results, H.C. Wainwright’s Scott Buck thinks the move has paid off. The company delivered revenue of $8.5 million, way above Buck’s forecast for revenue of $2.4 million.

With the rise of Delta, those testing facilities aren’t going away any time soon too. The Covid-19 testing facilities are providing “proof of concept to investors who have been less than patient in awaiting results.” Remember how high this stock was trending just a few years ago. Exactly one year ago the stock had a price of $5.50. To call it undervalued today is an understatement.

The average price target by analysts is $3.50, more than twice the current price. The market cap of the company is just $164 million. With vaccinates their revenue should bounce back in the second half of 2021 and in 2022. They have an absurd 52-week range of a low of $1.03 to a high of $5.74. Obviously they won’t soon go back over $2.50. However they should go over $2 as their revenue starts to increase again.

As an investor I like to go where the masses aren’t, where confidence has faded but common sense says it’s a good option for future growth. That’s how I look at a reincarnation for this brand, $XSPA, that’s not without considerable risks. Short float is 11.35%, that’s not low. However with 75k followers on stocktwits, this is a company on a lot of Robinhood radars. This means if it takes off, it could spike.

Furthermore, at last, the company revealed its new travel, health and wellness brand, Treat. The brand has been surprisingly innovative during tough times. The summer tourism bump will significantly improve its prospects. I hope this gives you some idea of why I like the stock. But do your own due diligence and use your own logic in speculative investments like this. If Delta takes off, its testing does well. If tourism does well, its spa revenues do well. You win both ways and either way.

However you feel about this brand, expect to see it in more U.S. airports in 2022 and 2023. This is a long term play.

Quelle: The Last Futurist