Today on CNBC's "Squawk On The Street", Jim Cramer asked, "When is Ruby Tuesday (NYSE:RT) gonna get it together, I happen to like their salad bar." Since the Company reported its earnings on January 10th the stock has dropped over 8%. and has been stagnating at this level for the past two weeks. So where are they headed?
Why Ruby Tuesday is Overpriced at $8.00 a share
1. This Morning, Credit Suisse Downgraded Ruby Tuesday to Neutral based on Macro Headwinds, and its Real Estate Valuation. Credit Suisse noted that Sale-leasebacks are a good strategy, but lower the value of remaining owned real estate, and with shares up from the $6-$7 range, real estate offers less compelling downside support. Additionally the firm cited macro pressures adding an additional headwind, with exposure to a lower-end consumer, leaving the restaurant chain particularly vulnerable.
2. In its past conference call, the company reported earnings and revenue which were below Wall Street analysts' consensus estimates. In the after hours trading session, the stock was last trading down around 8.50 percent to $7.60. Ruby Tuesday reported a second-quarter net loss of $15.1 million or $0.24 per share, compared to a loss of $2.0 million or $0.03 per share for the year ago period.
3. The Company's outlook was also lowered in the past earnings report. Ruby Tuesday said looking ahead to fiscal 2013, that it anticipates earnings on an adjusted basis, between $0.24 and $0.30 per share for fiscal 2013. In the Q1 2013 report, the company had guided adjusted earnings in a range between $0.24 and $0.34 for the fiscal year.
4. Short Interest for the company is at a staggering 5% as of January 15, 2013. Additionally, a lot of selling from insiders at the company took place when the stock hit $8.00.
5. The Company has been underperforming its sector by 60% over the last two years, and by 80% compared to the S&P.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.