The “Dark Knight” phenomenon continues to have a ripple effect on a wide range of stocks. While IMAX (IMAX) was a favourite among speculators, FBR has found a less obvious beneficiary: Hot Topic (HOTT):
While we do not believe the company is likely to comp positively in retail July (we are at a -4% for July), we do believe the company is likely benefiting from The Dark Knight phenomenon, which may help to drive HOTT’s movie-licensed merchandise.
FBR, luckily for HOTT, does also see other reasons to be positive on the stock:
From an apparel perspective, we also believe it is likely that the company is driving good sales in its coloured and skinny leg denim. We continue to believe that risk/reward remains extremely attractive from current levels. This is clearly a deep value and highly speculative play on the shares, and we recommend that investors with such an appetite should be involved in HOTT. We further believe that margins will expand over the next year and that the share price will appreciate accordingly.
FBR maintains OUTPERFORM on Hot Topic (HOTT), target $8.
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