PreMarket Prep Stock Of The Day: L Brands

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One of the hardest-hit sectors during the pandemic was retail. As we've started to emerge from the crisis, issues in the retail industry have come roaring back. One of those issues is L Brands Inc. LB.

The Company: L Brands is a women's intimate, personal care, and beauty retailer operating under the Victoria's Secret, Pink, and Bath & Body Works brands. The company generates the majority of its business in North America, with about 5% of sales coming from international markets in fiscal 2020.

Out Of Favor For A Long Time: L Brands made its all-time high in December 2015 at $101.53. Its long-term downtrend didn't end until March 2020, when it bottomed in single digits at $8. That low matched its March 2010 low of $8.16.

It rebounded to end 2020 at $37.19, which was a level that hadn't traded since July 2018.

Rally Continues In 2021: Since its March low, L Brands has traded higher in nine of the past 12 months, which includes four of the last five. The outlier being December when it had only a slight decline from ($38.81 to $37.19), which compares gains ranging from $3.57 to $9 so far in March.

Raised Guidance: Before the open, the company raised first-quarter EPS guidance from $0.55-$0.65 to $0.85-$1. The company "'improved sales trends which the company believes are primarily driven by unusual shifts in consumer spending patterns, resulting from government stimulus payments, a relaxation of COVID-19 restrictions."

Price Action: After a higher open, which easily cleared the former high for the move ($62.08), L Brands rallied all the way to $64.12 and reversed course. That marks the highest level for the issue since it peaked in January 2017 at $68.44.

As of 12:30 p.m., it found intraday support just under the former high of the move, declining to $61.79 and bounced back into the mid $62 handle.

Moving Forward: After such a major rally in an issue, it's hard to determine when or if it will end. With Friday’s rally, it has distanced itself from Thursday’s low ($56.01), which if breached may lead to lower prices. On the upside, a rally and close above the current high may signal a continuation of the rally.
Disclosure: The author of this article is long shares of L Brands.