The Motley Fool

Card Factory shares are rising. Here’s what I’m doing

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman selecting a Sell symbol
Image source: Getty Images.

Card Factory (LSE: CARD) shares are on the rise. The stock has increased over 15% in the past month and 120% during the last 12 months. Previous performance is not an indication of future results, of course, but the rises are impressive nonetheless.

So what’s behind the share price rally? I see two main reasons, which I’ll be discussing here. But despite Card Factory shares having a strong run, I’m still cautious on the stock. For now I’ll continue monitoring the share price.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

#1 – Liquidity update

Card Factory suffered in the pandemic and earlier this year there were concerns over its liquidity position. It announced in January that it may breach its loan terms, which set my alarm bells ringing.

Since then Card Factory has been giving investors regular liquidity updates. Last week, the company provided another one of these announcements in a rather short statement. I was expecting more details to base my investment case on, but I was sadly disappointed.

Card Factory indicated that it continues to have “constructive discussions” with its banking syndicate. This “supportive” banks have “provided further waivers in respect of anticipated covenant breaches through until 30 April 2021″.

In other words, the banks have given Card Factory leeway with its loans until the end of April. I think it’s worth highlighting that these financial institutions had previously given the company breathing room until the end of March. So the banks have kicked the liquidity issue down the road, just a little.

At this point in time, this vague liquidity announcement doesn’t give me much information. I think the banks are still waiting for the shops to open on 12 April to make a full assessment.

With no extra clarity on refinancing, for now I’ll adopt a wait-and-see approach with Card Factory shares.

#2 – Reopening

The second reason why I think Card Factory shares are soaring is due to the reopening of its stores on 12 April. Prime Minister Boris Johnson confirmed over the Easter weekend that the UK is on target to reopen certain parts of the economy next week.

This is good news for Card Factory shares. The company has over 1,000 stores and the reopening means that it can resume trading from them. I don’t expect sales to recover immediately to pre-coronavirus levels, but at least it’s a start.

The hope of returning to some kind of normality after lockdown has given the share price a boost. But I question how long this can last, even though I think in the short term that Card Factory shares will rise on the reopening trade.

My view on Card Factory shares

What I’m really waiting for is a realistic long-term plan for Card Factory. So far, the company has been addressing the short-term issues.

As I previously mentioned, I would like more information on refinancing in order to make my investment decision. I think it’s worth highlighting, that this depends on the performance of the shops when they reopen.

I’ll have to wait to see if the firm’s value proposition still resonates with customers, especially after people have become accustomed to ordering online. This is why I’ll be watching Card Factory shares like a hawk over the coming months.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has recommended Card Factory. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.