Today I’m throwing in the towel on Conn’s (CONN). Earlier this week, Conn’s missed earnings estimates by a whopping 27 cents, which meant instead of having profit growth of 62%, it had profits fall 4%.
Conn’s is having trouble with its loans to customers. The company used to be an electronics retailer, and has now moved into furniture, which is much more profitable. The trouble is there’s so many CONN customers who are 60-days or more overdue on payments. Recently, the company has tightened its lending practices, and that is working as new loans are being paid on time. But its the old outstanding loans that’s causing the company problems.
CONN’s 2015 earnings estimate just fell from $3.61 to $2.88. But more importantly I think investors will be reluctant to give CONN a big P/E because of credit concerns. In fact, I think the stock will garner a P/E of around 10 in the future. I feel it will be punished with a low P/E like poor credit lenders or pawn shops get.
So I’m selling my Conn’s stock, at a major loss. I purchased the stock at $75 last December, and now its $29 with no signes of life. This my biggest loss since I lost 76% in Mosaic in 2008, but at this point I don’t trust the stock, and there are other stocks that have more certainty that I can invest in.
