After spending much of the day up a fairly decent amount, shares of Tile Shop Holdings (NASDAQ:TTS) surged in the last hour of trading, to finish 12.5% higher on Thursday.
Tile Shop’s stock price didn’t jump on any particularly compelling afternoon news. The company didn’t issue any press releases or Securities and Exchange Commission filings; no big economic data or competitor earnings reports got investors fired up. It was just a random day that saw its stock price surge by double digits in the last hour of trading.
Maybe one piece of news — Wednesday’s lowering of interest rates as the Fed takes steps to stave off a potential recession — could have some investors hopeful the company’s prospects are a little better now. But frankly, even that’s a bit of a reach, considering the rest of the market didn’t move sharply higher today.
So what’s behind today’s jump? As annoying as the answer may be, heavy buying activity. In the last hour of trading, a number of large buy orders were placed, far outpacing sell orders and sending the price higher as buyers bid it up.
Yes, yes, I know: For every buyer, there’s a seller, and vice versa. But prices fall when sellers are driving the bidding, and they rise when it’s buyers. So buyers made the market for Tile Shop’s stock go up today. Moreover, the company’s struggles over the past couple of years have seen its market value plummet sharply; even after today’s surge, its market capitalization is only barely above $ 151 million. And when your market cap is that small, it doesn’t take a lot of action to move the stock price.
I know that’s not a very satisfying answer, but it’s about as close to a “why” as you’ll find.
Here’s what matters more — or should matter more — to investors: Can Tile Shop return to growth? The past few quarters haven’t been very good in that regard, with traffic and sales at existing stores — comps — falling. Simply put, it’s going to take a meaningful improvement in sales for investors to see a meaningful and sustainable increase in the stock price.
Don’t put too much weight on days like today. If you’re interested in Tile Shop, pay attention to its business results, not the stock price, and invest based on that. The results haven’t been great recently, but it does generate solid cash flows. That gives management some breathing room to find a winning formula to attract more customers.