PreMarket Prep Stock Of The Day: Lakeland Industries

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

There are some earnings plays in the market that are obvious and there are some that are really obvious. The monster beat from Lakeland Industries, Inc. LAKE falls into the second category, making it the PreMarket Prep Stock Of The Day.

Where Have We Seen This Before? In October 2014 at the height of the Ebola epidemic, the manufacturer and seller of safety garments and other protection accessories rallied from its September month-end close of $6.95 to $29.55 in October, before retreating to end that month at $14.10.

After falling under $15 in November of that year, it has basically gone nowhere for the last five years.

Another Epidemic, Another Rally: Following a year-long trading range in 2019 from $9.70 to $12.96, the issue broke out to the upside in January, reaching $16.28, before retreating to end the month at $13.94. Perhaps some savvy investors took a cue from the outbreak of the COVID-19 in China and correctly anticipated it would spread to the U.S. and throughout the world, creating a need for protective gear.

After a solid gain on Feb. 26 ($16.39 to $19.97), the issue went into a parabolic mode the following day. As panic over the epidemic began to increase, the issue opened sharply lower the following day, spiked to $28 and that was all she wrote.

The ensuing decline took the issue to $17.20 before ending that volatile session at $21.11. Since that day, it had gone no higher than $20.09 (until today) and traded as low as $12.44 in May.

Of Course, A Q1 Beat: If Lakeland Industries was ever to have a blow-out quarter, it was going to be this one. After the close on Tuesday, the company announced a first-quarter EPS beat of $1.02 along with a sales beat of $17.84 million.

The issue spiked from Tuesday’s close ($16.02) all the way to $24.80 in pre-market trading and began to retreat. Both the author of this article and co-host Dennis Dick were very skeptical of the rally for a variety of reasons. In fact, Dick was contemplating taking a short position in the issue off the open.

Pop And Drop: The issue was able to hold on to a majority of its gains heading into the opening bell. However, off its nearly $8 higher open, it went only another 3 cents higher to $23.99 and sellers engulfed the issue. It swooned to $18.55 but rebounded back into the $19 handle at the time of writing.

A complete recap of why the hosts were bearish the issue for today’s session can be found here.