Sophisticated Investors Should Avoid: The9 Limited (NCTY), The Michaels Companies Inc. (MIK)

The9 Limited (NASDAQ: NCTY) shares are -47.37% down in the year-to-date (YTD) period and have moved 5.77% or $0.03 higher in the latest trading session. However, stock’s trailing 12-month performance remains nearly +37.06% lower. Comparatively, the stock is -60.98% down YTD and -17.24% over the trailing 3-month period. If we look at the shorter duration, its week performance is -14.29% and -35.73% over the month.

Analyst Recommendations

On June 18, 2009, Oppenheimer recommended the NCTY stock is a Perform, while earlier, JP Morgan had Downgrade the stock as a Neutral on November 13, 2009. 0 of the 1 analysts rate the stock as a “Sell”, while 1 has rated it as “Underweight”. 0 recommend buying, with 0 rating it as an Overweight.

The stock currently trades at $0.48. The forecasts give the The9 Limited stock a price target range of $67.15 on the higher side while at least one analyst think the stock could plunge to a low of $67.15. The two limits represent an upside potential of 99.29% or 99.29%.

The Michaels Companies Inc. (NASDAQ:MIK), on the other hand, is trading around $10.80 with a market cap of $1.54B and analyst research firms have a negative stance on its shares. Analysts predict that the stock will reach $4.96 and spell out a less modest performance – a -117.74% return. Some analysts are even forecasting $0.94 per share in earnings this year on a short term (1 year) basis.

Let us briefly look at the The Michaels Companies Inc. (MIK) financials, with a focus on its operating details as indicated in its earnings report for the last quarter.

Company balance sheet and cash flow

MIK’s operating margin was positive on the trailing 12 months basis, remaining steady at 7.50%, while the operating expenses over the recent quarter were at $282.57 million. This represented a 64.67% of the company’s total revenues which amounted $799.89 million. With this in place, we can see that the company’s diluted EPS declined -$0.43 on the year-over-year period, growing to $0.24 as given in the last earnings report.

In terms of the balance sheet & cash flow as of (Jul 2020), the total assets figure advanced to $4.31 billion from $3.84 billion over the previous quarter. The cash flow from operating activities totaled -$55.53 million, significantly lower than the $33.8 million reported in the year-ago quarter. The company’s free cash flow for the quarter was -$77.38 million.

Insider activity

Insiders have transacted a total of 32 times at The Michaels Companies Inc. over the last 6 months, with insider purchases undertaken 18 times and accounting for 124,224 shares. Insider sales totaled 30,425 shares over the same period, with these deals completed in 14 transactions. Looking at these numbers, we realize that net purchases over that period are 4.0 shares. Insiders now hold a total of 696.92k shares after the latest sales, with 21.70% net shares purchased.

Major holders

Insiders own 0.30% of the company shares with a share float percentage of 93.70M. Investors are also buoyed by the number of investors in a company, with The Michaels Companies Inc. having a total of 280 institutions that hold shares in the company. The top two institutional holders are Bain Capital Investors, LLC with over 52.8 million shares worth more than $373.29 million. As of Jun 29, 2020, Bain Capital Investors, LLC held 35.83% of shares outstanding.

The other major institutional holder is Blackstone Group Inc., with the investment firm holding over 20.39 million shares as of Jun 29, 2020. The firm’s total holdings are worth over $144.18 million and represent 13.84% of shares outstanding.