Market Overview

Low Float Shipper TOP Ships Skyrockets Following Earnings

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Low Float Shipper TOP Ships Skyrockets Following Earnings

TOP SHIPS Inc (NASDAQ: TOPS) shares rocketed higher by 24% on Wednesday after the company reported a smaller-than-expected earnings loss in the first half of the year. While the numbers were certainly a major improvement compared to a year ago, the big move may also have to do with the stock’s relatively small float.

The Numbers

TOP Ships reported a net loss of just $600,000 in the first six months of 2019, a dramatic improvement over a $6.6 million loss a year ago. Revenue in the same period also jumped from $19.7 million in 2018 to $29.8 million this year, and operating income swung from a $3.5 million loss to a $5.3 million gain.

Market Dynamics

While the numbers were certainly positive for TOP Ships, market dynamics may also be playing a role in Wednesday’s big move. TOPS has a minuscule float of just 1.17 million shares. While short percent of float is also relatively small at just 2.7%, a surge in trading volume for such a low-float stock can temporarily squeeze prices higher. As of 12:15 p.m. ET on Wednesday, TOP had more than 2.3 million in daily volume, nearly four times its long-term daily average of just 61,860 shares.

TOP ended up with such a tiny float after it and many of its shipping peers underwent a series of reverse stock splits over the past decade as the shipping business took a big hit. According to StockSplitHistory.com, TOP has undergone eight different reverse splits ranging from 1-for-2 to 1-for-30 since the beginning of 2014.

Analyst Outlook

Despite the large move on Wednesday, Wall Street was relatively quiet about TOP’s earnings beat. One of the primary reasons for the lack of interest is the fact that Maxim Group is the only analyst that covers TOP at this time. Maxim initiated coverage with a Buy rating back on April 22.

Even after Wednesday’s big gain, TOP shares are down another 43% overall since the Maxim initiation.

Benzinga’s Take

Given eight reverse stock splits and more than a 99% drop in share price in less than six years, investors should be buried in TOP Ships red flags at this point. Tuesday’s numbers were encouraging, but potential investors should proceed with extreme caution given the company’s track record.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Link:

An Empty Rally? Shipping Stocks Make A Low Float Comeback

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