Shares of Costa Mesa-based Volcom Inc. took a wild ride with the market Friday, ending up more than 7% at the close of New York trading.
The clothing maker got a boost from an analyst’s report that cautioned about the tough retail market but said Volcom’s strong balance sheet and brand will help it gain market share.
Earlier in the day, Volcom’s shares were up as much as 17% before going negative for a time and then rebounding with a late surge of buying on Wall Street that gave way to a decline in the final minutes of trading.
Volcom has a market value of about $300 million.
The gain in Volcom’s stock came after Caris & Co. analyst Claire Gallacher raised her rating on the company from “average” to “above average” in a mixed research note.
A challenging retail environment, the global credit crisis and economic downturn prompted Gallacher to lower her profit estimate on Volcom by about 10% to $35.3 million for 2008 and $36.5 million for 2009.
Weak September sales at Anaheim-based Pacific Sunwear of California Inc. and Washington’s Zumiez Inc. could make orders for Volcom’s products fall “below expectations,” she wrote.
But Volcom’s lack of debt and brand cachet could help it weather a downturn, Gallacher wrote.
“Volcom is in a position of strength boasting a balance sheet with no debt, approximately $80 million in cash and clean inventory levels,” Gallacher wrote. “While orders are weak from a shrinking addressable market, Volcom is one brand that continues to gain market share.”
The company’s brand is expected to remain strong as smaller competitors “have pared back in visibility” due to the “challenging macro environment,” Gallacher wrote.
