The B. Riley Financial (NASDAQ: RILY) stock price has been one of the worst performers in the financial services industry this year. It has crashed by over 16.8% this year while the S&P 500 and Nasdaq 100 indices have jumped by more than 14% and are sitting at their all-time highs.
Highly shorted and high dividend yield
B. Riley Financial shares have tumbled this year as concerns about the company continued. One of the biggest crises was its investment in Franchise Group, the parent company of Vitamin Shoppe, Pet Supplies Plus, American Freight, and Buddy’s Home Furnishings.
The small investment bank was a key funder of Franchise Group’s acquisition by a hedge fund manager who has been accused of committing fraud. Reporting by the WSJ and Bloomberg has confirmed that the company had a longer relationship with Brian Khan. It has also been accused of poor disclosures for the transaction.
B. Riley Financial then released its 10k report in April and emphasized that its business was still doing well. As part of the audit, the company adjusted its previous figures to show that its total revenue was $1.644 billion, slightly lower than the previous $1.647 billion.
Its net loss also came in at $108 million, down from the previous $86.4 million while total assets were $6.07 billion from the previously released $6.10 billion. These adjustments were better than what most analysts were expecting.
Now, the company is implementing a turnaround strategy in a bid to reduce its costs. As part of this transition,it is in the process of selling the Great American Group, a move that will help it to reduce its debt and invest in its core securities, advisory, and wealth management.
Despite these issues, B. Riley Financial is still one of the most shorted companies in the United States. It has a short interest of over 52%, meaning that most investors expect it to continue falling.
B. Riley Financial’s bears have been well-rewarded as the stock has tumbled by more than 60% from its highest point in 2023.
The general view is that the company will likely continue to underperform the market this year and that its losses are still there. Its most recent results revealed that the net loss came in at $51 million as its revenue tumbled to $343 million from the previous $432 million. There are also concerns that the company will slash its dividend, putting its 11% yield at risk.
Still, there are some positives, that makes B. Riley Financial a potentially good investment. It has reduced its debt, is disposing its Great American Group, and is growing in some core divisions. For example, its advisory business had the best first quarter on record, helped by appraisals and bankruptcy restructuring services.
B. Riley Financial stock price analysis
RILY stock chart by TradingView
The daily chart shows that the RILY share recovered and reached a high of $39.43 in April after it published its 10k report.
It then suffered a harsh reversal and moved below the key support at $27.8, its highest point in January. Also, the stock has formed a death cross, where the 50-day and 200-day moving averages cross each other.
The Relative Strength Index (RSI) and the MACD have all retreated. Therefore, the outlook for the stock is bearish, with the next important support to watch being at $13.9, its lowest point on February 21st. A drop below that will point to more downside since it will show that bears have prevailed.
The alternative scenario is where it drops to that support and then resumes its bullish trend as investors buy the dip.
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