What Happened:
Shares of luxury furniture retailer RH (NYSE:RH) jumped 8.9% in the morning session after CEO Gary Friedman bought more than $10 million of the company's shares at an average of $216.10 per share. The recent purchase put his ownership at a little above a quarter of all the company's outstanding shares. The CEO's purchase of RH stock can be considered a bullish signal, as it demonstrates increased confidence in the company's future. It could also indicate that the CEO thinks shares are undervalued at the current price.
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What is the market telling us:
RH's shares are very volatile and over the last year have had 25 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago, when the stock dropped 17.6% on the news that the company reported disappointing first-quarter earnings results: Its adjusted EBITDA and EPS missed analysts' expectations. Looking ahead, next quarter's guidance was below for both revenue growth and adjusted EBITDA margin, showing that the company is not only growing slower but that growth is less profitable.
Finally, management struck a very cautious tone, calling out "the most challenging housing market in three decades" and the expectation that "the constantly changing outlook regarding monetary policy will continue to weigh on the housing market through the second half of 2024 and possibly into 2025." Overall, the results were quite bad.
RH is down 16% since the beginning of the year, and at $239.88 per share it is trading 40.3% below its 52-week high of $401.84 from August 2023. Investors who bought $1,000 worth of RH's shares 5 years ago would now be looking at an investment worth $2,115.
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