RAVE Restaurant Group Update

January 16, 2018 at 12:51 pm 3 comments

Rave Restaurant Group’s (NASDAQ: RAVE) stock surged Friday, closing up 19% after rallying almost 50% in early trading on volume that was more than 20x normal volume.  This on the heels of a 10% move the prior day on 5x normal volume.  Have investors realized that RAVE appears to be back in growth mode?  With new Pie Five locations opening in Miami, New Jersey, San Francisco and Baltimore over the last few months while the stock has continued to trade at prices that suggest bankruptcy is imminent, one could argue that the stock is finally just catching up with the operational outlook.  Pie Five is growing and new CEO Scott Crane has the company at the forefront of the fast casual pizza space in terms of innovation.  In addition to opening in these many new high profile locations over the last few months, Pie Five has also been the first in the space to offer a drive through, delivery, adding sandwiches to the menu, adding a 14″ shareable pizza and adding a super healthy cauliflower pizza crust.  While it is still too early to see the revenue implications of any of these initiatives, we do believe that CEO Crane is leading a turnaround with RAVE and that the stock had not adjusted to reflect this potential. 

But was the move at the end of last week a flood of recognition from investors that things are turning around?  Probably not.  The speed and fury with which traders were piling in to RAVE stock Friday morning (so much so that the NASDAQ halted trading briefly) suggests to us that it was something else entirely. There were posts in various online forums suggesting that RAVE was about to switch its customer rewards program to a blockchain based cryptocurrency reward program similar to what Chanticleer Holdings (NASDAQ: BURG) announced last week. Prior to that announcement on January 2, BURG’s stock had been very thinly traded in a range of $1.90 – $2.60 for months. On the blockchain rewards announcement, the stock surged to over $5 per share and traded many millions of shares and it has since settled in to a trading range over $3 with much higher average daily volumes.  We think traders were looking at a thinly traded, small float, big short interest stock that was oversold and decided to buy in on the chance that it might be the next big blockchain mover.  Had the company actually announced such a deal, we would not have been surprised at all to see RAVE shares make a similar move ($5+) though it would have likely given much of that back in the same way that BURG and many of the others have done.  So if we get a Wednesday morning PR that RAVE is “going blockchain”, we think the stock will move even higher on the economics of huge demand vs. small supply.  And while the move may only be short lived, traders who bought shares below $2 will likely be rewarded handsomely in such a surge and if it plays out like the many others before it, RAVE would settle into a trading range much higher than the $1.40 – $1.50 range where this all started. And we think the company’s operational momentum already justifies a double digit percentage upgrade to that trading range.

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Entry filed under: Uncategorized.

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3 Comments Add your own

  • 1. Tim  |  January 17, 2018 at 7:16 pm

    Thanks for update.

    Reply
  • 2. Tim  |  January 23, 2018 at 4:53 pm

    Your latest stock LMFI link is not working

    Reply
  • 3. Tim  |  February 22, 2018 at 5:07 am

    Do you know if RAVE convertibles are paying interest? Did they miss a payment due 2/15?

    Reply

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