I’ve been cautious when it comes to Card Factory (LSE: CARD) shares. But the stock has been on the rise recently. During the last six months, the share price has increased by 185%. And it has risen by 129% in the past year. To me, this means that investors appear to be turning bullish on the stock.
In fact, I’ve changed my mind on Card Factory shares too. I’ve been watching the stock price closely and a recent announcement has resulted in me turning positive on the company.
I’d now buy the stock. But let me explain what has caused my change of heart.
Card Factory has been giving regular updates, especially on its liquidity position. So it was not a surprise to me when I saw that it had released another statement on the matter at the end of last week.
But what took me by surprise was how it casually announced that it had secured a refinancing package. In fact, the company said it “has agreed headline terms for refinancing of the Group with its current syndicate of commercial lending banks and will issue a further update, over the coming weeks, once terms are documented”.
I had previously mentioned that I was looking for a long-term plan from Card Factory. I felt that what it was sharing publicly had been addressing mainly short-term issues until now. But really it needed to show us it was set to tackle the elephant in the room, which was the refinancing of its debt.
I’ve been waiting for this to make my investment decision. And I think the statement is encouraging. I’m pleased that it has reached a deal to sort out its liabilities.
The news is in the open, but I guess I’ll have to wait for the finer details on the refinancing package. Yet I already feel this has lifted the uncertainty over the company’s future. I expect the new terms to give a boost to Card Factory as the business emerges from the coronavirus crisis. After all, the pandemic was a major strain on its finances.
The firm also highlighted that “pending documentation of the revised facility terms, the banking syndicate has extended waivers in respect of anticipated covenant breaches to 31 May 2021, taking account of the Company’s cash flow projections, subject to certain conditions”.
Again, this is all positive news. It helps the investment case for Card Factory shares as far as my own portfolio is concerned.
But there are still risks ahead. The stock is likely to be hit if there are any Covid-19 setbacks. Although most of its stores are now open, the recovery may take some time.
And while the company has agreed a refinancing package, it hasn’t released the details yet. While I’m positive, investors may not be convinced by any new terms, which could impact the share price. I’ll have to wait and see the details.
But so far, it looks good for the company, I feel. The reopening of its shops in England and Wales from 12 April “has exceeded its expectations”.
This is promising and could be positive for Card Factory shares. The company is due to report its full-year earnings on 8 June, but I think now is a great buying opportunity before it does so.
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.