Children’s Place (NASDAQ: PLCE) stock price continued crashing this week, moving to a low of $6.72, its lowest point since 1998. This is a sharp collapse for a company that was trading at $155.20 in October 2022. A $10,000 investment during its peak price would now be worth about $430.
Short sellers have prevailedThe Children’s Place has become one of the worst-performing companies in Wall Street this year. Its stock has plunged by more than 71% this year and by over 77% in the past 12 months.
This sell-off intensified after the company warned that it would delay publishing its annual report, which is often a red flag. It also secured a $90 million term loan in April in a bid to boost the company’s balance sheet.
The Children’s Place, which owns brands like Gymboree, Lazy Dog, Sugar & Jade, and Carter’s, has been going through major challenges as competition rises.
The most recent financial results revealed that its revenues dropped from $509 million in the thirteen weeks to October 2022 to $480 million in the same period last year. This slowdown happened as the company transitioned its business from a retailer to a digital-first retailer.
Therefore, most investors believe that the company will continue feeling pressure in the coming months as its slowdown continues. It is also facing substantial competition from the likes of Target, Walmart, Amazon, and Kohls.
All this explains why most investors believe that the company’s stock will continue falling in the coming months. Data by MarketWatch shows that the firm has a short interest of 65%, making it the fourth most shorted company in Wall Street after SunPower, BYND, and B.Riley Financial.
Still, there is a likelihood that the company will rebound. For one, its market cap has dropped to about $86 million, making it a bit cheap. The most recent results showed that the company’s net profit rose to $38.4 million in the last quarter. It has also raised $90 million to boost its balance sheet.
Children’s Place stock price forecast
Turning to the weekly chart, we see that the Children’s Place share price has been in a strong bearish trend in the past few months. This crash accelerated this year, in line with my last prediction in February.
The stock has crashed below the key support level at $9.26, its lowest level in March 2020. It has remained below the 50-week and 100-week Exponential Moving Averages (EMA).
PLCE’s Relative Strength Index (RSI) has drifted downwards and is nearing the oversold level of 30. The Stochastic Oscillator has moved to the extreme oversold level. Therefore, the outlook for the stock is bearish, with the next point to watch being at $5.
It is worth noting that a lot can change this month since the company is expected to publish its earnings on the 23rd. As such, while the outlook for the stock is bearish, a short squeeze cannot be ruled out.
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