Pressure appears to be building on Guzman Gomez (ASX:GYG), the Mexican food retailer attempting to compete with McDonald’s at home, and a saturated U.S. market.
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Year-to-date returns for the stock were down -30% on Monday morning as shares sat just over $28/sh. Given the stock listed at $29.00/sh just over a year ago, that means the stock’s 1Y returns are up by only +1.3%.
Short-selling pressure appears to be a factor. In recent weeks, shorting activity on the stock has increased, with just over 6% of all shares now shorted on the ASX, per Shortman data.
GYG shorts expressed as a line chart (ASX:GYG) (Shortman)
What this ultimately points to is a not-very-exciting reality where, perhaps, at least for now, more bearish analysts looking at the fast food retailer have had more of a point than the market at one point cared to listen to.
To be more to the point: there’s no shortage of commentators who wonder if Guzman is, and always was, overvalued. The 40% surge the company enjoyed when it listed has now been entirely erased.
And while measuring a company’s progress by newsflow can be a dangerous trap for microcaps (as well as multi-billion dollar market cap companies like Guzman), it’s perhaps fair to say there’s been a drop of momentum from the company.
Excitement around its listing just over 12 months ago has worn off, and, a recent Macquarie Conference presentation wasn’t particularly a catalyst for the stock. Nor was a particularly optimistic article in The Australian.
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