By Leslie N. Masonson, MBA
LuxUrban Hotels Inc. (LUXH) is a Nasdaq-listed firm headquartered in Miami, Florida, with a short lifespan, as it came to market as an IPO on August 12, 2022. LuxUrban caught my eye on October 4 while I was checking out the Stock Viewer, as it was the top-ranked stock in the entire Vector Vest universe of 9,161 stocks. In particular, I noticed its low price ($5.22) and its high VectorVest rankings, so I dug in to do more research. By Friday, October 6, it closed at $5.72, marking a gain of over 20% for the week.
Its 52-week price range is $1.24 (reached on October 24, 2023) to $5.78, closing at 5.60 on Friday for a gain of 352% from the low. It is extremely rare for a low-priced stock to have such a high VectorVest ranking. Furthermore, there were only four stocks out of the top 100 VST-ranked stocks that are priced under $6, so its scarcity is another reason to be interested.
What could account for its current place at #1? Let’s delve into the company’s business. LuxUrban Hotels’ business model is to purchase long-term leases with distressed hotels in major cities that have financial issues due to COVID and are in need of a cash infusion. They offer short-term room rentals to potential clients globally.
LuxUrban targets hotels in Los Angeles, Miami Beach, New Orleans, New York, and Washington D.C., and they lease out the entire facility to vacation and business travelers on a long-term basis. Rooms can easily be booked through the company’s online website, third-party providers, and other channels. There are currently 1,600 rooms available for lease, and the company has a program underway to expand its room capacity to much higher numbers while offering clients a high-quality experience.
Currently, the company employs 213 individuals and has 36 million shares outstanding. LUXH has reported trailing 12-month revenues of $79.2 million and annual sales of $1.33 billion. Its market capitalization stands at $193 million, and it pays no dividend. The stock is classified as a consumer cyclical in the lodging business.
On Wednesday, October 4, it closed up 7.16% for the day, one of the best percentage increases among stocks priced over $5 a share. Moreover, its daily volume surged 498% over the prior day to 550,000 compared to its recent daily average volume of 92,000 shares. On October 5, it gained 2.87% to $5.37 on 390,000 shares, and on October 6, it closed at $5.73 on 403,000 shares. Something unusual is going on here as more volume keeps coming in, raising the price to another all-time high.
Looking at the chart below, since its August 22, 2022 IPO at about $3.25, it went straight down to $1.24 on October 24, 2022, only to rebound to $3.84 by May 24, 2023. Then, it declined to stall in a trading range of $2.71 to $3.18 from June 8 to September 5 before a breakout on September 6 with a solid long green bar accompanied by heavier than normal volume. VectorVest issued a “Buy” signal on that date at a closing price of $3.34. Any subscribers taking that signal would be up 71.6% in one month.
There was a recent two-week price consolidation in the $3.50 area before finally breaking out on September 22 with a big advance and massive volume nearing 700,000 shares with more price highs and volume surges.
Neither investors nor institutions are unfamiliar with this firm, as it has only gained the attention of eleven institutional investors, which is a minuscule following. Collectively, these firms own a significant 8.5% of the outstanding shares, while insiders hold an impressive 75% stake. This is the exact opposite of the typical institution-to-insider ratio.
No institution owns more than 0.41% of the outstanding shares, with most owning less than 0.16%. Moreover, only two analysts are covering the company. Overall, institutions have basically not entered the playing field with this company.
Interestingly, on September 13, 2023, Chairman and CEO Brian Ferdinand purchased 10,000 shares, adding to the 60,000 already purchased during the year, both of which indicate his strong belief in the company’s future. Moreover, there have been a total of five insider buys during the year with no sales.
LUXH is categorized under VectorVest’s Real Estate Management category and holds the #1 position among 53 companies. Furthermore, it also secures the #1 position in the broader Real Estate Management sector, which comprises 86 stocks. This is particularly noteworthy, considering that the group itself is ranked #163 in Relative Timing (RT) out of 222 tracked industries, signifying a below-average ranking.
Usually, it is problematic to buy a stock in an industry group that is in the bottom quartile, as stocks in industries tend to move together like a school of fish. A stock significantly outperforming its group needs to be carefully investigated to determine why it’s swimming against the trend. Therefore, let’s check out its VectorVest metrics.
LuxUrban Hotels Offers Outstanding Metrics, Is Undervalued by 36% and Is Making New Highs for the Past Four Days
The VectorVest software issues buy, sell, or hold recommendations on 9,161 stocks/ETFs. This proprietary stock rating system splits the data into three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each is measured on a scale of 0.00-2.00, with 1.00 being the average for quick and easy interpretation, and 2.00 being the best.
As for LUXH, its current metrics are as follows:
- Excellent Upside Potential: The Relative Value (RV) rating focuses on the stock’s long-term, three-year price appreciation potential. LUXH currently holds an RV rating of 1.62, which is exceptionally high. The current stock price is $5.75, and VectorVest places its value at $7.79, indicating that the stock is considerably undervalued with a potential upside potential of 35.5%.
- Fair Safety: The Relative Safety (RS) rating is based on the company’s business longevity, financial predictability/consistency, debt-to-equity ratio, and additional risk parameters, including price volatility. Its RS rating of 0.87 is below average, which makes it unsuitable for conservative investors.
- Excellent Timing: The Relative Timing (RT) rating focuses on the price trend over the short, medium, and long term. The components include price direction, dynamics, and price magnitude of price changes over daily, weekly, quarterly, and yearly comparisons. LUXH boasts an exceptionally high RT rating of 1.90, well above the database average of 0.79. This indicates that the stock has consistently outperformed across various timeframes. But remember the stock has only been around for over a year which is not a meaningful timeframe for most investors to evaluate a company.
- Excellent Comfort Index: This index measures the consistency of a stock’s long-term resistance to severe and lengthy corrections. This index compares the individual stock to the fluctuation of the VectorVest Composite price. LUXH’s rating of 1.61 is well above average. This reading indicates that it would be suitable for conservative investors which was contradicted by the Safety rating score.
- Excellent Growth Rate (GRT): LUXH’s current sales growth rate over the past 12 months has been a rather bountiful 212%, with an exceptional forward-looking earnings growth rate of 48% (measured over a forecasted three-year period). These two factors, among many others, are captured by the VectorVest software. Therefore, you can quickly get a picture of the company’s fundamental measurements with a few mouse clicks.
- Excellent VST Score: The VST Master Indicator ranks all stocks from high to low with those stocks with the highest VST scores at the top of the list. LUXH’s VST is 1.54, which is outstanding and the highest of all the 9,161 stocks tracked. The VST enables subscribers to quickly identify stocks that are performing much better or worse than the average, and LUXH is clearly in the cream of the crop.
LuxUrban Hotels’ impressive metrics (e.g., five “Excellent” ratings), including its recent rapid price acceleration, indicate the potential to continue moving higher and reach new all-time highs. A break below a price of $5.00 would suggest it's time to exit, if you've taken a position above that level.
The earnings trend is on an upward trajectory, and the average daily trading volume of 102,000 shares provides sufficient liquidity. Please note that the bid-ask spread can fluctuate between 2% to 6%, which is high. However, this is common for lower-priced stocks with less than one million shares traded daily.
Therefore, if you decide to purchase the stock, consider using a price limit order between the bid and ask prices to get a better execution. Otherwise, you may be vulnerable to exploitation by market makers. Also, be aware that the third-quarter earnings release is just around the corner on November 14.
Avoid chasing this stock. Wait for a pullback and consolidation, and always have a stop in place. If you are stopped out, you can consider re-entering at an appropriate time based on your selected VectorVest timing signal (Primary Wave, DEW, Green/Light Buyer, or Confirmed Call) and a LUXH “Buy” signal. Currently, the Daily Color Guard advises against buying stocks at this time.
Another cautionary note is that the price is currently 57% above its 40-day moving average, which means the price is significantly stretched and will likely experience a pullback, similar to a stretched rubber band. Is LUXH a needle in the haystack? The odds are that it is. However, remember to thoroughly examine its financials and read other reports about this company before putting any money at risk, as there is no investment without risk. This is pure speculation, given that the company has only been in the public markets for 14 months. Caveat emptor.
If you're not a VectorVest subscriber, consider the $9.95 30-day trial to confirm that both the VectorVest Daily Color Guard and LUXH stock are giving bullish signals before taking action.
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